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- [00:03]
A
Class is in session. Hey, everybody, and welcome to Unlearn 16. Class is in session. Today I have, thank God, Mr. Global, otherwise known as Matt. Mr. Global, I think, on all platforms. And he's here to talk about our energy sources, where our oil comes from. What the heck the difference is between crude, between natural gas, between all the things that my brain doesn't yet understand, why we keep selling it, refining it somewhere else, shipping it overseas, and then buying it back from them so that we can understand this space. So when we start hearing things like drill, baby, drill, we'll know what the heck everybody's talking about. Welcome to the podcast, Mr. Global. Matt, thank you so much.
- [00:53]
B
Thank you so much for having me. I'm happy to be here.
- [00:57]
A
Listen, this is a hard hill, I'm not gonna lie. We have a steep mountain to, to climb. I, I guess let's start at the very basics. I'm going to take this as an introduction to Energy101, sort of North American driven. Well, we can talk about what goes on in the Middle east and that later, but let's understand the basics. Number one, what's the energy we're getting out of the earth in its different forms and where are they primary primarily located? Does that make sense? Does that question make sense? Because I know there's crude oil, I know there's natural gas, I know our crude oil is dirtier, and then my intelligence fades away. So please.
- [01:39]
B
Yeah, so when you're talking about fossil fuels, you know, crude oil, natural gas, and coal is a fossil fuel as well.
- [01:48]
A
So those are the three, basically.
- [01:51]
B
Yeah.
- [01:51]
A
Okay. All right, now, now, sorry, natural. I heard you say at some point you could turn crude oil into, I mean, you could turn coal into gasoline. And my head nearly exploded. Is that, did I hear that right?
- [02:06]
B
Yeah, we don't do it. But you can, you can take any type of fossil fuel and turn it into, you know, gasoline. It's, it's, it's, it's a carbon compound. So it's just you're modifying the molecular chain, basically. So. And the reason I said that was a lot of people think that we can't refine, you know, Canadian oil sands into gasoline. And that's simply not true. We do it every single day. So I was using coal as an example. You know, I said, man, we can even turn coal into gasoline if we wanted to.
- [02:41]
A
So, yeah, so it's crude oil comes out. Let's focus on crude oil for a second. We'll leave natural gas over here. So, so crude oil is the, well, the Crude substance that we pull out of the earth. And then this crude oil can be manufactured into many different things. Yeah, yes, yes. Okay, what are some of those examples? So one is gasoline for your car and you know that kind of thing.
- [03:09]
B
Well, yeah, mainly, you know, transportation fuels is what crude oil is mainly used for. You know, gas, diesel, jet fuel. That makes up the vast majority of what we use crude oil for. But crude oil is used in over 7, 000 products we use every day. You know, your, your prescription is an oil and gas product. You've probably heard all this before of all of the things that are oil and gas. But it's mainly transportation fuels and then feedstocks to make plastic.
- [03:43]
A
Those are kind of big one.
- [03:45]
B
Yeah. And those are kind of the, you know, that's what we refer to as petrochemicals and those are kind of the really big things. All of the little stuff, you know, when they talk about, you know, medicines and I don't know, paint, drywall, whatever I'm looking at in here, that is a tiny, tiny fraction of, of crud of our consumption of crude because it doesn't take a lot. So.
- [04:08]
A
Okay, so we'll again, we'll narrow it down a little bit and we'll just go to fuel sources so cars, trucks, diesels, whatever type of fuel source. So we have this crude oil we get out of the earth and then there's a refining process. Now there's different kinds of crude oil. Could you delineate between the different kinds?
- [04:27]
B
Yeah, well, basically you have a light sweet crude which is what is predominantly produced in the United States. And then you have your heavier sour crudes, I think by the way US.
- [04:40]
A
Companies named it like that. That's rude. I don't think it's nice that you guys get to be the sweet one and we're the sour. I think that's some hard marketing, but nonetheless. Okay, so.
- [04:51]
B
Yep, that actually came from the taste of it back in the old days.
- [04:58]
A
Why are you tasting it?
- [04:59]
B
Well, back in the old days they would taste it to see what, what it was. Basically so light sweet crude. So all of this is based on API gravity, which is the oil's density is compared to water. So you know, the, the, the gravity of oil in the United States has a higher number, so that'll be around 60. And the heavier the oil or the, the more dense it is, the lower that gravity number goes. So you know, you're, what you have there around Alberta is at about a 40 API gravity. So it's much heavier than the Light, sweet. And it's, it's just different. You know, it has a little sulfur in it, it's a little heavier in density, it's got a little more tar in it, but it's still the base. You know, carbon compound, you know, molecular chain is just a little bit different. So they can all be used for anything is the important part right now.
- [06:07]
A
From what I understand, the, the oil that. Let's say we'll focus on Alberta, that Alberta has in its resource, it sells cheaper but is more expensive to refine. Is that the basis of it?
- [06:24]
B
It is slightly more expensive to. To refine. But the way our refineries are set up in the United States is historically we relied on foreign oil, you know, throughout our history. So we built our refineries to refine that foreign oil. And now that we produce so much of our own, we don't need it as much. So it is slightly more expensive, but it's so much cheaper that it actually, by using Canadian oil, it actually lowers our gas prices. That's why we use so much of it.
- [07:02]
A
Okay, so what that means is your infrastructure has been set up. And then. I'm going to come back to a question in a second. Your infrastructure over the years has been set up, meaning the refining plants, let's say, to actually refine our type of oil, or foreign oil in general, not your oil. So that in order to start refining your oil, your type of oil at a much higher level, in order just to feed us need, you would have to change all of that infrastructure, which I'm assuming would take time and be incredibly expensive.
- [07:37]
B
Right. So what we do is we just blend the two together and we can take the two and put them together and still reach a viscosity or an API gravity that works with our refineries so we can use them both. A lot of people think that we don't refine our own oil. We do. We refine 9 million barrels a day of our own oil. But all of that is mixed and blended with Canadian oil, Mexican oil. It's. It's blended with heavier oils. So they, they put the two oils together, they reach a specific gravity and visco viscosity where it still meets the. What the refinery can handle. And that's what they refine. So if we had to refine strictly our own oil, we would have to change a lot of things in our refineries, but we're able to blend it where we can still refine a lot of ours.
- [08:32]
A
Can I ask a question? Yeah. Why would you? Because you Guys have obviously enough oil reserve. Was it just about not finding the oil reserve earlier on? And that's why you started to. It doesn't make sense for any sort of rational person to say, why would a nation, any nation depend. Well, Canada does it, but I understand us a little bit better. Why would we depend on. Why would the United States depend on somewhere else for their oil? If you guys had oil deposits, why, why go out of state, come back in state kind of thing?
- [09:06]
B
Yeah. So historically we have, we relied heavily on OPEC for our oil, which is a heavy oil, and that's because we didn't have the technology to produce the oil that we have in the United States.
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A
Okay.
- [09:20]
B
The, the oil that we produce today is much deeper in the ground and it's in a much tighter rock. And, and what that means is the permeability and porosity of that rock is very tight. If you look at a rock under a microscope and you zoom in far enough, it will look like a piece of Swiss cheese. It has tiny little like molecular pores in it. And, and that is what the oil and gas flow through. Right, Right. So our oil is much deeper and it's in much tighter rocks, so it's much more expensive and much harder to get to. But before about 2005, we couldn't officially efficiently extract that oil, so we were heavily dependent on, on foreign nations. Basically what happened was we found and extracted all of the easy stuff, which is what they call conventional wells, where you just drill a straight hole in the oil flows out. We found all that, we used all that we had to go deeper and farther. And so the oil we produce today is much more difficult to extract.
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A
Right.
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B
But everything we produce today is, is basically the last. We're about to 20 years is what we've been doing for the last 20 years with technology. Before that, we couldn't have ever produced that oil.
- [10:41]
A
Oh, okay. So, yeah, again, so your technology has shifted to the point where you can get at that oil. And I know I'm going to come back to this in a second. Are there, I'm assuming, stronger, more significant impacts to the environment accessing that type of oil or.
- [11:01]
B
No, I would say the biggest thing is, is water usage. So, you know, to get the type of, to get the oil we get today, that's where the hydraulic fracturing comes in. And they also do quite a bit of fracturing in Canada as well. Not in the oil sands, but farther north where they have lighter oil. There's light oil in Canada as well. It's not Just the United States. So, yeah, that's where hydraulic fracturing comes in. You're talking about using enormous amounts of water because you're just injecting this water under very high pressure deep into these wells, and that water cracks that rock. It basically fractures it and cracks it. And then the sand that they put in the water goes into those cracks and it props it open and it keeps those cracks propped open. And if you can imagine water, like if you're standing on a beach and, you know, water washes up on the beach and you see it kind of disappear down into the sand, that's exactly what happens when oil flows from a well that's been hydraulically fractured, that all that is seeping through all of this sand that we packed in there. It's really pretty cool.
- [12:16]
A
And that's what. That's what fracking is.
- [12:19]
B
That is what fracking is, yes.
- [12:21]
A
So. So when I hear people talk about how horrible fracking is, we can't do it. This is a horrible thing. Why are they making that argument? Is it because it sounds very destabilizing? I'm not gonna lie. Like. Like we don't get any earthquakes up here, but it feels like it's. It's sort of destabilizing basis of, you know, what we live on top of. Am I. Is that. Is that the argument. Is that the problem with fracking, the.
- [12:51]
B
Biggest problem with fracking is actually, you know, if you pump a hundred thousand barrels of water into the ground, which, you know, would be a little over 4 million gallons. Right. If you pump that much water into the ground and you frack this well, then that. When that well flows, all of that water comes back out. And.
- [13:17]
A
Right.
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B
That water's not any good. Like, you cannot.
- [13:20]
A
Right.
- [13:21]
B
You can reuse that water, but only to frack again. Like, we. We have the technology to recycle that water where it's actually able to drink, but it's so expensive, we don't do it. So the problem with fracking is getting rid of that water. And.
- [13:38]
A
Right.
- [13:38]
B
And so what they've been doing, they've been injecting it back down in the ground in what they call injection wells or disposal wells. So they'll drill a well into a very porous geologic formation that is kind of like an underground river that exists, and they'll pump that water into there. The problem is there's fault lines.
- [14:03]
A
Yeah.
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B
Well, here we are. And when you. When you. When you flood a fault line, you reduce the friction that's keeping those. Those faults from sliding. And Causing earthquakes. And when you pump a lot of water in there, if you're near a fault line, you. You caused earthquakes. And here where I live, our earthquakes went up by, like, thousands of a percent. Initially, they couldn't figure out why, but they eventually figured out what was happening and.
- [14:32]
A
Right.
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B
So they. They located the wells that were near fault lines, and then they stopped using them to dispose of the water and the earthquake stopped. So it. It sounds so simple when you hear that out loud that, you know, scientists couldn't figure this out. It's actually very simple. You pump a ton of water into a fault line, something's going to give up eventually due to erosion and everything else. So.
- [14:58]
A
But that, I'm assuming all the water we're using is not. Is fresh water, too. Right?
- [15:04]
B
We use fresh water, but we also reuse frack water. So water that we.
- [15:10]
A
Yeah, yeah, yeah. I'm just thinking, I mean, obviously people talk about the scarcity of fresh water and the possible scarcity of fresh water, so I guess that could be yet another argument they would make. And they say, listen, we can't be using this resource that is used for, oh, so many other things in order to do this job. But if you're telling me they, you know, take X amount out of wherever and they can just consistently reuse it, then I think that's trying to solve that. That problem. Right?
- [15:39]
B
Yes.
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A
Okay.
- [15:40]
B
So initially, they only used fresh water because they. They didn't know how to recycle the. What they call flowback water, the water that returns after the frac. So initially, early on, it was just fresh water. Now it's mostly reusing recycled water, but there's still fresh water used when they can't. When they don't have access to recycled water.
- [16:03]
A
Right, right, right. And it does make me uncomfortable to think, you know, oh, we're just gonna store it in the earth. I. It's just kind of like, what do we do with our leftover nuclear weapons? I know I'm gonna put them in a big concrete block and put it in the ocean. Sometimes we're so, so dumb. I'm like, all I want to say to those people is, didn't you see Godzilla? It didn't. It didn't end well. Like, I just, you know, and then my mind goes to Superman 4, you know, where he takes them all and he throws them at the sun. These are our, you know, the best solutions that we possibly have. Okay, so let's go back to what's going on sort of politically right now, because obviously we Have Trump saying there's going to be a 25% tariff on, you know, everything we've ever made. Let's be honest, it won't be on oil. He'll just, he'll just keep that caveat out. But nobody's going to talk about that just yet. But let's say it's across the board because the United States is still relying very heavily on Canadian oil and foreign oil. As you've said, they've made no such switches and they rely on that based on the infrastructure. And so the notion that we need to drill more, which obviously was Trump's big focus. Drill, baby, drill. Can you explain a little bit of what's gone on in your industry over the past little while and how that is true, how that is needed or not needed or how you see it?
- [17:38]
B
Yeah, it's pretty funny. You know, we had to listen to this drill, baby, drill for the last two years. And for the last two years, I've been telling everyone, this is not a thing. Like, we're not going to do this. This is not going to happen. And it's in, you know, the oil companies, especially big Oil, you know, they came out and, and basically repeated everything Donald Trump said and gave them their full support. And then the moment he got elected, the moment he got elected, they said, yeah, we're not. We're not doing that. We're not. You know what I mean? Like, so they got him into office so they could get their tax breaks and their regulations cut. And then as soon as they got them there, they're like, yeah, we're not. Not. We're not drilling. Like, that's not. We're not going to do that. The fact of the matter is. Go ahead.
- [18:29]
A
Yeah, go ahead. No, no, no, go.
- [18:31]
B
No, we're. We're producing more oil and natural gas than any country in the world has ever produced. But more importantly, we don't need a lot of drilling rigs to produce because our technology has gotten so great that we can produce what we produce today with 20% of the rigs we needed, you know, 20 years ago. We just can. That's how efficient. Yeah. So even if we wanted to ramp up production a bunch, it wouldn't have anything to do with drilling. It really wouldn't. It. The drilling wouldn't increase.
- [19:04]
A
Right.
- [19:06]
B
So.
- [19:06]
A
But also, because you guys aren't using your own oil. Right. And this is. I can't wrap my mind around this. I get it. I get that you can't necessarily produce it all, but it becomes very confusing. I Think to the average citizen to think, you know, and. Which is a really easy lie for him to sell because if you're buying oil from Alberta, but in the same breath the United States is buying oil from Alberta, and in the same breath you're saying we're producing more oil than we ever have and we could use 20% of the rigs that we ever used. People are like, well, why can't the United States government then. And I know the answer, but I'd like to hear why can't they control prices? Why, why on earth would we rely on the Middle east or Canada or anyone else for oil when our gas prices pop off, when we have the resource? And I say we, not as a Canadian, but as an American.
- [20:08]
B
Yeah, well, as you know, you know, oil prices are dictated on a global market. And OPEC controls nearly half of the global market. And over the last few years, we have increased production significantly in the United States. As we increase production, OPEC just continues to decrease to keep the price high because it's traded globally. And the reason, the reason OPEC continues to decrease is because the demographics and those nations in the Middle east have changed drastically. And you have to understand that these countries and the people that live in those societies rely heavily on that oil revenue. And so if you imagine Saudi Arabia, you know, $20 oil, they were all driving Lamborghinis. It was great. Well, now they have a much larger population. They have, the government has a much larger financial burden than to, to meet, to take care of these people. So they need oil to be much more expensive just to meet their budgets. They've basically outgrown themselves. And these are growing pains. So they need 60, $70 oil. So they're not running huge budget deficits. So they keep decreasing supply to keep the price up, basically.
- [21:30]
A
Which is kind of crazy when you think. Because what that means is they're selling less. And as they sell less at a higher, it gets very supply and demand. Right? So if they're selling less at a higher price, you would think, well, if you lowered the price, more people would buy. But there's only a certain level of consumption. Need. Right, right. Like, like an actual need. There's only so many cars people are driving in the world. So if the consumption stays relatively consistent, it makes sense to make sure that those barrels cost as much as possible. Because people, it's not like something you don't need. Right. It's a, it's a, an essential resource. So it's not like, well, I'm just not going to buy A new phone this month, even though I know the plastics in the phone come from oil. But you get my drill.
- [22:18]
B
Yes.
- [22:18]
A
It's not like that. We need it. So if we need it, and we need it for all of these different things, there's no way to minimize, there's no way the demand ever changes. So they fluctuate, they purposefully manipulate and fluctuate supply in order to control the price. Then why wouldn't the United States, I'm going to say a four letter word here for a U.S. person, but why wouldn't the United States consider nationalizing this resource outside of the yay capitalism. But why would you not say, listen, we are going to produce all of our oil, we're going to take care of all of our needs, we are going to lower the cost, like just drop it into the ocean, no pun intended, so that all of all of our fuel needs to run our businesses, to run your cars, transportation, to, to do what you need to do on farms, all of that's going to drop. And as that drops, we are going to be more competitive on every other single global market. Does that make sense or am I insane?
- [23:26]
B
No, you're not insane. The problem is in the United States about 80% of the oil, water and all minerals that exist underground are owned by individuals. So in the United States, one person can own the land, but another person owns the minerals under the surface. And that's crazy. And so you can own the water rights separately, you can own the rock, you can own the oil, you can own the gas. Like, and there may be seven different geologic formations underground in any one spot that's owned by seven different people. Like this person, they, they divide it up just like real estate, just because it's below the ground.
- [24:10]
A
Do you have a year, like what time period do that?
- [24:13]
B
They started doing that.
- [24:17]
A
They're like this, this 17 acres are mine. And you have a guy down the street goes, yeah, but the oil that's underneath it, that's mine. You can have whatever you want at, huh?
- [24:27]
B
Yeah. So some guy came along and, and some guy owned some land and he said, hey, I would like to purchase your land from 8,000ft deep to 9,000ft deep. And that's all I want to own. And they were like, sure, I'll sell you that. Like, what am I going to do with that? And they make up. And that's how it started. And then it just went from there. And, and so now, you know, the United States owns all of the minerals, the oil, gas, rock, water, on federal lands, they own 100 of that.
- [25:00]
A
Right.
- [25:01]
B
But about 80% of all the land in the United States as far as the minerals is concerned, is owned by people like me or you, like private individuals, mostly farmers, that these mineral rights were handed down generation to generation because back in the old days, if, if you got, if your family got 40 acres and a mule, if you've ever heard of that, right, you got the 40 acres, but you also got everything below. You got the minerals. And so as people acquired land throughout time, they were acquiring the minerals too, but no one was thinking about the minerals. Like it wasn't a thought. Like, you know what I mean? Like they were just, they just had the land. Well, then someone comes along and it's like, hey, I'll offer you this much money for these minerals. And that's kind of how that started. And it just, it just went from there.
- [25:54]
A
Right.
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B
But a lot of like the minerals, say in West Texas, the biggest oil field at this point probably in the world, a lot of that oil is owned by individual people that's been handed down from like five, six, seven generations. So this is like, this is like a generational wealth thing. These people own an asset they don't have to touch, they don't have to manage. It's like it doesn't exist, but they own it. It's so weird. And then a company comes in and just gives them millions of dollars for something they've never seen, touched or smelled like because it's 10,000ft below ground. Like it's kind of crazy, but. Right. That, that's how it happens. So.
- [26:37]
A
So, but even in. Okay, so let's, let's say they're even just people driven. Okay. Is it. Because like I'm assuming there's no. Could be completely wrong. Are there any foreign nations, foreign companies that are now purchasing said minerals 10,000ft deep?
- [27:00]
B
Yes, absolutely.
- [27:02]
A
Oh, here's where it's going to get messy.
- [27:05]
B
Yes.
- [27:06]
A
Oh, I see. So, so when you. Everybody's all talking about Bill Gates buying up farmland, but what they should really be talking about in the same sentence is who's buying the minerals underneath in order to, and I'm going to say, I'm going to guess they're doing so in order to sure up control of the supply.
- [27:27]
B
Yeah, it's a lot of corporations that are, that are acquiring this stuff, and some of those corporations are foreign. You know, there's, there's a lot of the, the Japanese own a lot of minerals in like East Texas. The Chinese own a lot of stuff in West Texas. But one thing we saw, you know, in the last 10 years is, you know, the, the land that Bill Gates is, is kind of scooping up, he also is getting the water rights. And he's, he's, he's more concerned about the water rights than he is the oil and gas. Because, because in the future water is going to become more scarce because of pollution and everything else. And there's, there's been quite a few billionaires scoop up huge pieces of land and just the water rights, like they don't want to deal with the oil, they just want the water because the water is very valuable too. And it's super easy to extract. It doesn't cost a lot of money. So. But yeah, that, that's a thing.
- [28:38]
A
So, so when, when the price at the pump. So when we're all up in arms about how much it costs to fill up a tank of gas. Right, because most people aren't really understanding the, the external ramifications, you know, how your tomatoes go up because now the transport truck needs to pay more from A to B or whatever. Let's just talk about filling up your, your tank of gas. There is no legitimate way, I, and please tell me if I'm wrong that the government of the United States or the government of Canada can really control or determine that cost at the pump. Is there any. What influence can they exert?
- [29:26]
B
I would say def. Not directly, but indirectly they can. One of the reasons there's basically two things that control gas prices and that is the price of oil, you know, because that's basically the raw material.
- [29:41]
A
And also party said that as we increase our, our supply, OPEC decreases it. So it stays at the same price. Yeah, right. For the most part.
- [29:52]
B
But you also have your capacity and ability to refine that oil into gasoline. Oil is traded on a global market. Gasoline is traded on like six different markets within the United States. And it's very local and it's very regional. So if in a certain district in the United States there's not enough supply due to refining restrictions, because we lost a million barrels a day of refining capacity during COVID we had a lot of refineries shut down.
- [30:23]
A
Right.
- [30:24]
B
So even if oil prices would have dropped a lot, our gas prices would have remained high because the supply of gasoline in relation to demand was still low. Even though oil could have came down, the gas still would have been high. So there's more than one variable there that determines those prices. So we've recovered about half of that refining capacity we lost. And that's why We've seen gas prices come down, but it's important to note that gas prices are very localized and regional and not global. And that's why, you know, in the state of Washington, gas is $4, and where I live, it's $2.30. Some of that has to do with supply and the fact that geographically they're isolated from sort of the core infrastructure of the oil and gas industry in the United States. You know, you have the Rocky Mountains, they're way out there. It's hard to get product to them. And plus their taxes are higher, so their gas is expensive. I live in Oklahoma, and almost every pipeline that runs through the United States towards the Gulf coast goes right through the middle of, of Oklahoma through a town called Cushing. It's called the pipeline capital of the world. There's like hundreds of pipelines that go into this town. So it's readily and easily available where I live. So there's always plenty of supplies. And, and it's kind of a rural area, so it's cheap where I live. It's real expensive in California, Washington, Pennsylvania. So there's, there's dozens of things that can affect gas prices. And a lot of people are surprised to learn that geography is a huge deal when it comes to gas prices. Because if you're kind of isolated from all of the core infrastructure, it's harder to get fuel to you. It's harder to maintain supplies. That drives up the price of gas. And gasoline is traded on a market just like a stock. Like, there's not a person that just decides gas is going to be this much. It's sold in futures. You know, it's just like buying a share of Amazon stock, buying a gasoline future. So it's the traders that dictate the price, the wholesale price, and. And then from there. Yeah, and then from there, the retailer buys it from a distributor and they determine how much they need to mark it up for them to have a profit. So a typical gas station is making about 10 to 20 cents per gallon on a gallon of gas. And all that other increase in price is down the supply chain. You know, starting with the traders that are trading the future. The gasoline futures. You have RBOB and you have carbob. Those are two types of fuels. One is a clean burning fuel. One is, you know, the RBOB is reformulated blend. These are basically the core products that, that make gasoline. And that's all traded on an open market.
- [33:24]
A
Yeah, okay, so you said it's like, I'm just gonna try to put this into like, well, it's just like. Okay, so let. Let's say you have. Like you're saying there are six different companies as a whole that are trading gasoline. So these six different companies control the gasoline flow that goes with. On. Within the United States. Okay. And then each comp.
- [33:56]
B
Not six companies. No, there's. So they're called pads. P. A D D. And a pad is a district. Right. It's like an area, a geographic area. And there's six different pads in the United States. So they've broken up these districts within the United States, and within each one of those, there's probably thousands of companies that are actually doing the trading. But I was. There's six districts where it's. Yeah. And that.
- [34:27]
A
That makes sense that the district would have the biggest influence on the price because your geographical location is going to be one of the determining. One of the biggest determining factors on gaining access to the gas.
- [34:43]
B
Yeah.
- [34:43]
A
And the reason you have different companies fighting about it.
- [34:47]
B
Yes. And. And the reason we set up these districts was During World War II, we had to ration fuel to people across the United States, and we had to make sure everyone had enough. And, like, this group of people wasn't getting more than they needed, and these people weren't getting enough. So they set up all these districts to monitor how much gasoline was within each of these districts. And this all occurred during World War II because they were rationing fuel to everyone to make sure that we had enough. And that's how those districts became a thing. And they still exist to this day. So.
- [35:25]
A
Sounds like the Hunger Games, Matt.
- [35:27]
B
It's kind of like that. Because if District 1 has a little more gas than they need, then they can sell some to District 2, but they may go out there and throw javelins at each other to fight over it. I don't know.
- [35:38]
A
Oh, okay. So. So district wise, really, then governmentally speaking, this would be. The specific states within that district would be talking about their particular pad. Why do you think af. I know the answer to this, but again, I'm just going to wait for you to say it. Why do you think they didn't. They didn't take away the districts when we were done with the need to ration?
- [36:08]
B
Because the way these districts are set up, they also. They still exist to meet the needs of the people within those districts. And so the districts have vastly different geography, vastly different demographics, income, the amount of people that live there. So it's more like. We call it a district, but it's more like the way they look at it. Strangely, it's almost like, okay, it's almost like six different countries. And, and all of these districts are very different in their consumption and their demand and their production. And so those still exist. But districts do trade oil and gas across each other. If this district has too much, they'll send some to that district. But that's kind of why they still exist more for measured measuring and monitoring and. And still to make sure everyone's getting all of their needs met. But yeah, it's. It's kind of weird, the whole district thing. I personally don't feel we need it, but.
- [37:15]
A
Yeah, well, it feels like a whole other level of, of separated government, if you know what I mean. You have. You have cities. Well, you have counties, you have cities, you have states, you have the nation. And it feels like this is yet another way the United States is divided into subsets to fill their needs, which, you know, when you guys divide into subsets, bad things happen to fill their particular needs. And then it seems very sort of. You're making it sound nice because you're like, well, then if I have too much, I can sell over there to District 7 or whatever. But in actuality, what I'm going to be doing is taking advantage of the fact that they need what I have. And I'm assuming I don't have to sell it at any particular price.
- [38:04]
B
Yeah.
- [38:05]
A
So the number one issue I've got to expect, and somebody. Some people acknowledge it, it's not about production. It's not about resources. It's not even about refining. It's about transportation. It's about getting it from A to B. Yes, that's it.
- [38:28]
B
That is. Yep. That's a big piece of it.
- [38:31]
A
So the, the most significant part I would expect if I were in government and I really wanted to talk about lowering gas prices, the only part they really control on a big level, if they can't control the. The price per barrel, because that's being, you know, unless you're going to become completely isolationist about it. The only way I can control it and reduce it is to make sure that I can get it to places that don't necessarily have as much access. So would that be a. Are we touch. Just talking pipelines? Strictly pipelines.
- [39:11]
B
Pipelines, ports, rail, trucking, all of it. It's also important to note that I believe the district still exists because of corporations. So the price, the wholesale price of gasoline is different in every district because every district has its own supply and demand sort of scenario going on. So if I was a buyer and gas in pad one was 30 cents cheaper than pad two and I found a buyer in pad two. Then I could buy gas for 30 cents cheaper in pad one and sell it to the guy in pad two at a 30 cent profit just by buying a contract and then selling a contract to someone else. So I think the corporations have a lot to do with those districts still existing because it's more about profit and being able to trade and make profit. That's the biggest thing those districts do. When it comes to a corporate level. There is a ton of trading that goes on around all those districts. And cheaper gas from the districts that have lower prices is constantly being bought and sold to districts that have higher gas prices for a markup. And that's all stuff that's done in offices and trading rooms by people that wear suits. You know that. That's just how that works. So that's absolutely one of the. That's. I believe that's the main reason the district still exists. Outside of that they're really not needed. I mean, it's kind of neat to, to see how it all works, but how necessary is it? It's not, it's not really necessary, so.
- [40:49]
A
Well, it sounds like it's necessary for the formation and the continuation and for the consolidation of monopolies.
- [41:01]
B
I mean. Good point. Yeah.
- [41:05]
A
So what you're saying in essence is the gas prices or the, the, you know, all of the energy needs and pricing and all of that, especially during COVID as it all went up, as it all is really primarily to do with just like it had to do with everything else about the price gouging that was enabled or that was legal by corporate entities. So the only way to rectify this, or maybe the single biggest way to rectify this is addressing corporate control having nothing to do with supply, having nothing to do with refineries, having nothing to do with even like transportation of oil. Would you. Because I remember seeing a stat and it's hard to know how true these are, but I remember seeing a statistic about the price of goods as it went up during inflation. And out of the hundred, like let's say inflation went up by 100%. 40% was, was just the company going amazing. I'm going to jack up my cost 40% because nobody's going to know. And I'm going to blame inflation, I'm going to blame the government printing money. I'm going to blame foreign wars, I'm going to blame whatever I can blame. Would you argue that? Do you think that's the primary driver.
- [42:37]
B
As it relates to just Covid. And what happened after that, that inflation, the inflationary pressure that was put on oil and gas that was created by the United States government, the Russian government and the Saudi government that they created that with the OPEC 2020 deal. Right, right. They cut global production by 10% for two years, which is insane for a pandemic that was only, we were being told was going to end in two weeks.
- [43:10]
A
Right, right.
- [43:12]
B
So during the first two years of the Biden administration, OPEC was producing 4 or 5, 6 million barrels a day less than they were under the Trump administration because of this deal. And that is what drove up oil and gas prices. Now, where corporations and, and companies can get into inflating, artificially inflating gas prices, that happens in two ways. Either on the trader level, you know, the people buying and selling the contracts, not the oil companies themselves, but the traders, a couple of them just recently got busted in California for doing some unsavory things with trading futures options. But really the only thing oil companies can do to drive up price is just produce less. It's just refuse to produce enough product. And so where we're at today, oil companies, we have gotten into three price wars with OPEC over the last 10 years. And what oil companies in the United States, the problem is, is we have corporations that compete with nations, Right. So when you look at a pick.
- [44:27]
A
An oil company nationalized in Saudi Arabia, it's nationalized in Iraq. Yeah.
- [44:31]
B
So you have a Chevron and they have a competitor, and that competitor is an entire nation state, not another corporation. So oil companies in the United States, they rely a lot on private equity money and, and people to invest in projects. Money has to flow into the industry. So if the United States produces too much oil and upsets opec, they just completely flood the market, crash everything. Oil companies in the United States lose all their money. A bunch of them go bankrupt. So what producers in the United States, since they're competing with nation states, they basically produce as much as they can until they get to a point where they think they're going to upset opec, and then they kind of stay right there because if they upset opec, they're going to lose a bunch of money. But more importantly, they're going to lose all the future investment because now that investment becomes so risky and it'll make it much harder for them to get those investment dollars in the future. That's kind of where we're at right now at the beginning of 24, I, I told everyone that the increase in oil production in the United States for 24 is going to be flat because we've reached this point where OPEC is saying, okay, that's enough, that's enough. You're taking too much of our market share. And so they're writing this sort of line on how much they can produce before they basically piss off opec. If you remember, you know, the, the pioneer thing and the Hess thing, you have, you know, John Hess, you had these two oil men who have been accused during these mergers and acquisitions of sort of colluding with OPEC to manipulate prices. What they were doing was they were, they were having meetings with them and basically, yeah, they were asking them, how much can we produce before you guys put us out of business? Business, Right. And that's where that sort of collusion comes in, because Saudi Arabia can literally just open a valve and produce more. They don't have to do anything. The oil in their country is very easy to produce. They could immediately increase production by 5 million barrels a day right now if they wanted to. All they have to do is open the valves. It takes us years to increase oil production because our oil is very difficult to extract. So oil companies are playing this game with OPEC where they're trying to produce as much as they can without basically pissing them off, and they completely crash the market to recapture their market share. It's a mess. It's kind of a mess.
- [47:12]
A
Yeah, well, it's kind of a mess because. And this goes back to everything else, you know, that, that we talk about in the grand scheme of things, because people love to talk about what their nation can do, what their country can do, what their government's going to do. And they do it with blinders on and not purposeful blinders. This is, this is a lot of information for somebody to sit down and try to wrap their heads around. And this is just one of the bajillion industries. You'd have to do it to really get an understanding of what economic trade and globalization and, you know, all of those shared resources actually, actually look like. So I get that. But when you're sitting here saying, well, I'm going to elect a certain government to deal with it, whatever the government happens to be, it doesn't seem as though there's a lot of power in the government unless they're only going to do one of two things. Unless you're going to go to war and you're going to say, saudi Arabia, this is now ours. Solution number one, Solution number two, you nationalize in heaven. It's again, my apologize. You know, saying that to an American, you nationalize American oil and you no longer even bother with the prices and you, you take it right off the, the, I can't even imagine, I can't even comprehend how much money gets lost there. But you take it right out of the pot, right? You say, listen, you guys, do you. I don't care what you're doing anymore, I don't care the price of OPEC oil because we're going to produce our own, refine our own, sell our own to each other, and that's all that's going to happen. And you guys go off and do whatever you're going to do. Is there a tertiary solution other than doing what we've always been doing, which is trying to figure out a balance, trying to figure out having more conversations. The word is collusion, but what it really is, is compromise and conversation. In order to have a balance in, in that sphere, what would you, what if you had a wand or you had a, you know, what would you do right now? I'm going to give you all the power.
- [49:37]
B
The first thing I would do right now is I would create because. So here's. And I'm not opposed to nationalization of it. And the reason I'm not opposed to it is so how this works in countries where their natural resources are nationalized. You know, Chevron, Exxon, these companies that exist in the United States, they also exist in Saudi Arabia and they drill and produce oil in Saudi Arabia. But how it works over there is the country just pays them to do it. It. So regardless of the price, yes, there's a profit there, no matter the market. It's, it's the government taking on the entire risk. So Chevron can go to Saudi Arabia and they can drill and produce wells and, and they're guaranteed a profit no matter what because they're doing a service for someone else. The problem with nationalizing in the United States is the trillions of dollars it would cost.
- [50:35]
A
Cost.
- [50:36]
B
That's. Well, other than the thing you said about Americans, you know, just being completely opposed to that in general.
- [50:43]
A
Yeah, sure.
- [50:44]
B
The biggest roadblock is, is, but one thing that I've proposed for a long time is, you know, they have, you know, they have their cartel, OPEC has their cartel. It's now up to 7, 17 countries plus some additional. And, and they all work together. And I think we need our own organization on this side of the world. I think we need our own. And I think we can trade and we can set up our own trading district on our side we can have our own cartel where the US does business with Canada and Mexico and South America and Australia and we set up our own sort of OPEC and, and we trade all within ourselves and that sort of completely eliminates all of that. Assuming none of that gets crossed and sent to other parts of the world. Another, another idea. So I floated an idea to my senator a couple of years ago when gas prices were really high because one of the problems we have in the United States is how much gasoline or refined fuels that we export, we export a lot of gasoline. So we have people in this country that are paying a lot for gasoline while we're sending it to other countries and if we kept it here it would be cheaper. Right, right. So I proposed a trigger law to my senator and he actually loved the idea. It was a trigger law that if gas price reaches a certain level then there's a trigger that automatic automatically comes in that reduces the exports for a period of time until gas prices are back in check. And you know that was getting a lot of traction and a lot of attention when gas was $5. Now that gas is $3. They've kind of completely forgotten about it.
- [52:30]
A
And that's because more power in that scenario.
- [52:33]
B
Well that's because in the United States.
- [52:35]
A
Losing money then, right?
- [52:38]
B
Well in the United States we don't address problems until they're on top of us. Like we don't look forward and try to like stave them off. We wait for the problem to come and then we sit around and we're like oh my gosh, what do we do? Well we could have fixed this two years ago by being ready for this to happen because five dollar gas is going to happen again in the United States. Six, seven dollar gas someday it's going to happen and we're going to be having this entire conversation again. So why not pass the legislation now? That way we don't have to worry about it then. But we only solve problems when they're as bad as they can get and they're right on top of us. That's how we operate, that's how we've always operated. I don't know why we're not a very forward thinking people but I think.
- [53:24]
A
That trigger law though is going to. And this is a fundamental issue in the United States I think. And it's this fundamental issue that business interests come first, that that protection of a business entity and profit making ability is always going to take place priority. Because everything else is communism, Matt. Everything else. Right. And so when you don't put a trigger law in, it's all of a sudden.
- [53:50]
B
Whoa, whoa, whoa.
- [53:51]
A
You're not a capitalist now? Well, no, I'm not a capitalist. To the detriment of our actual citizens. That doesn't make sense. But again, they throw out the four letter word, which obviously isn't four, but they throw this word out as though that's what it means, when what you're actually talking about is very reasonable limitations of profiteering in certain times, in certain spaces over essential goods. You're not talking about people going out and buying new TVs. Those can be whatever the hell they want to be because nobody needs it. You're talking about an energy source that is absolutely necessary to the survival and maintenance of our lives. So in that capacity, it makes sense that there would be trigger laws. It makes sense. There would be limitations to profiteering. It. All of that makes sense. But you're going to stand against capitalism? Yeah, that's it.
- [54:56]
B
My station. Right. And my thing about the trigger law is that if the trigger law exists, there's a psychological element to that. If the trigger law exists, we never need it. We never get to that point. Because. Yeah, because, because getting to that point and crossing that line is more punitive than staying below that point. So that psychological element comes in. If you put the trigger law in place, it actually, it's working, but you never see it getting used because they will stop or reduce exports before they hit that trigger to avoid the more punitive nature of it once they hit it. And you know, it was Senator James Lankford in Oklahoma. He's the guy that wrote the border bill that Donald Trump killed. That's the guy I was talking to and he was like, this is a great idea. Like, I love this idea. I know he had brought it up in some committee, but gas prices started falling and so the problem magically disappeared. So we're not going to deal with it. That's how, you know, that's how it works in the United States. But it's going to come back, it's going to happen again. So.
- [56:14]
A
Well, I feel like I've had about eight years of education in an hour, Matt, and I think I need to take a knee just for a minute. But I want to thank you so much and I would love, I, I have every, you know, idea in the world that we're going to get, like lots of questions, lots of comments. I would love to invite you back to, because I know we didn't go down all the roads and heaven help us. We didn't even go down the road about what do we do about alternative sources should we be turning to. Because I would love to have that conversation with you as well. And you know, how we do we or how do we make any transformations into more renewable energy? Because I think that would be incredibly powerful. So I would love to have you back when you have time.
- [56:57]
B
Absolutely.
- [56:58]
A
And I would love to thank you for explaining this to me as a very low level learner at this point. But I promise you I'm going to get better.
- [57:10]
B
The toughest thing about all of this is the terminology. And there's, there's so much terminology that, that applies to so many things that people get very confused. But yeah, when I saw your video when you were talking to your classroom, I was like, man, I wish I could have been in that classroom. That would have been so much fun.
- [57:30]
A
And it's so funny because all of those guys, they saw the tick tock, then they saw your response and now they're going to watch this podcast because they were really trying to understand it. And it's so funny where everybody's like, well, everything's on Google. It's so easy to. No, it's, it really isn't. It really you and, and it's proof in positive that you need people that are passionate, that are educated and that are willing to share it and explain it different ways without all the vernacular and the discourse that is keeping people out in order for them to have an educated stance to take and then make some pretty big decisions, especially about who you're going to vote for and why you're going to vote for them, Right?
- [58:13]
B
Exactly. Yep.
- [58:16]
A
Well, Matt, thank you so much and for everybody's listening, please put all your questions in the comments and I will see you. Matt, don't go anywhere when I say goodbye because I need you to stick around for two seconds. I forgot to tell you that the video. I'll see everybody else next Tuesday. Same bat time, same bat channel dismissed.