Daily Energy Standup Episode #312 – EV Rollback, Toyota’s Strategy, and LNG Ban

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Daily Standup Top Stories

Shocking development: Biden plans to roll back rule designed to juice EV push on country

Highlights of the Podcast

00:00 – Intro
01:25 – Shocking development: Biden plans to roll back rule designed to juice EV push on country
04:00 – Why Toyota May Have the Best Strategy in the EV Race
09:16 – The Boom in Battery Metals for EVs Is Turning to Bust
12:00 – Electric Vehicles Are So Unpopular That Entire Mines Are Shutting Down
15:39 – A Ban on LNG Exports Could Boost Carbon Emissions
12:18 – Charting the Course of U.S. Oil Production
18:55 – Markets Update
22:20 – Outro

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:14] What’s going on, everybody? Welcome into the Tuesday, February 20th, 2024 edition of the Daily Energy Newsbeat standup. Here are today’s top headlines. First up. Shocking development. Biden plans to roll back. Rule designed to juice EV push on the country. That is a shocker. Next up, why Toyota may have the best strategy in the EV race. Hint it’s not EVs. Next up, the boom in battery metals for EVs is turning into a bust. And finally, electric vehicles are so unpopular that the entire mines are shutting down. That finishes the EV thread to begin. We’ll then finish with two more stories charting the course of U.S. oil production. And finally, a ban on LNG exports could boost carbon emissions. We love that. The joke. Stu will then toss it over to me, and then I will quickly cover what happened in the oil and gas market today. Pretty quiet as the markets overall financial markets were closed. So just a few different, topics to cover before a big week of M&A. But as always, I’m Michael Tanner joined by Stuart Turley. Kick us off my man. [00:01:25][70.9]

Stuart Turley: [00:01:25] Hey let’s start around here with our buddy Biden. A shocking development Biden plans to roll out back rule designed to juice EV push on the country. In our picture of I’m going to just leave that alone. But he’s hanging out of his head and he can’t even drive. The Biden administration is planning to slow down the rollout of a rule that was designed to juice the United States transition to electric vehicles. Michael, this is, very much do you remember, the prime minister of the UK took a beating because he did the same thing. The EPA just rolled this out. The new car rule last year would require nearly 70% of new car and truck sales to have no tailpipe emissions by 30. 2032. The critics claim the sudden shift would devastated the U.S. auto industry, so they’re going to give them a reprieve by a couple of years. Michael, and I think that this is going to be a little bit of a black guy. We know they’re, pandering to the climate activists, and this is going to be a big problem. They say, oh, we’re not quitting, but we are pushing it out because of the EV failure. [00:02:48][82.7]

Michael Tanner: [00:02:49] Yeah. Well, it’s it’s funny how they wait a year too long to roll out with stuff. It’s it’s sometimes like a little too little too late, unfortunately, because you’ve still got California going full steam ahead with their with their plans, which yes as on a countrywide it doesn’t matter. But you still have the individual states which we’re all in favor of state power here. [00:03:14][24.9]

Stuart Turley: [00:03:14] He there are 17 states that have added legislation Michael, that says anything California does they can be is stupid. So so goes California. So goes 17 stupid states. [00:03:27][12.9]

Michael Tanner: [00:03:28] So this is this. But you have to remember this was just a leak of a potential announce. They haven’t said anything yet. [00:03:33][5.6]

Stuart Turley: [00:03:34] Oh there there they this was a flag to throw out there to see how bad it got. And I guarantee you they’re going to have to because the unions, the one union boss that is out there is costing a lot of jobs out there, and he’s got to do something to appease them and realize that. And the next, three stories are going to really kind of add into this. Let’s go to Toyota. Michael, I’m going to brag on me and you here for half is sake. Why Toyota may have the best strategy in the EV race. You and I have been on this for quite a while, and that is why are we not putting EVs? I mean, secondary and I again, I love Elon, I love Woody Allen’s doing. And why don’t we just go to the Toyota hybrid model? Let’s go through some of the numbers in here. The four quarters. Tesla’s generated total revenue and earnings of 96,000,000,015 billion, for, respectively, for Toyota, Toyota’s revenue roughly three times larger. Oh, excuse me, at 299 billion, in 44 billion, profits. But yet Tesla’s market cap is more than double that of Toyota. And that’s because of the carbon credits and and everything else in there. So. [00:05:01][87.8]

Michael Tanner: [00:05:02] It’s it’s extremely fascinating why Tesla trades at such a multiple relative to the other carmakers, you know. One would say. I would say it’s a lot to do with they were a tech company masquerading as a, you know, they’re the they’re trying to brand themselves as a tech company when they’re really a car company. The problem is, they really are a tech company with autopilot. And a lot of the stuff they’re doing on the software space. I don’t have a problem with valuing Tesla higher than I do other automakers, because if they figure out autopilot and are able to license that software to other companies, they will far and away become larger than the physical automakers. Now they also come out with really cool cars. It is interesting, the model, and this is where comparing comps becomes a tricky issue. We saw this in in in in a soon to be released deal, spotlight with John Farrell, we highlighted the difference of the multiples between pi and what pioneer got. And being bought by Exxon and what Diamondback paid for endeavor. But it’s hard to compare them because there’s so much extraneous stuff around it that multiples don’t necessarily make sense. Being able to pick comparable companies to say this is a comparable transaction. Therefore, this is how much I should be valued. He’s tricky. Should you look at Toyota like Tesla? No. In fact, they’re two different businesses that may not have any relation with each other except for the fact that they build cars. [00:06:30][87.7]

Stuart Turley: [00:06:31] Here’s, two big things, takeaways out of this article. Michael EV drawbacks. Kelley Blue Book, claims the five year cost to own an EV versus, Ice vehicles is 15% higher. I disagree because I think it’s the insurance is just now starting to go through the roof on this. You take EVs lose an average of 43,515 in value. Ice, internal combustion engines depreciate, by 27,883. So, then you have the batteries are less efficient in those kind of things, but the the obvious benefit is fuel costs. The EV owners will save approximately 5000 and gas, but that’s going to be made up in insurance very easily in a year and a half. Yeah. And part. [00:07:27][56.6]

Michael Tanner: [00:07:28] Of why, you know, Tesla, you know, if we can scroll down here in the fundamentals chart, we can throw up here Miss Produce. You’ll see on you’ll see really key into that growth area. You talk about revenue growth one year Tesla at 18 Toyota at 1005. Year is 33% relative to only 1.1 for Toyota. So we’re toilet where Toyota is eating. It really is the fact that they over a five year span, they have not necessarily grown revenue. And 1.1 percentage points is a rounding error. So from a percent of how much they’re growing, the growth theoretically is probably being looked at by Toyota as cap. Now the problem is if they do if hybrids do become the thing of the future, they’re poised to be on top of that. So this is also we’re coming down to where do you think the market is going and applying that future market to the current fundamentals of either of these companies. And that’ll give you a pathway to valuation. [00:08:31][63.4]

Stuart Turley: [00:08:32] Let me throw this at you just a little bit. And that is Ford. Ford is having to Ford is having to retool. You’re having the unions. They’re shutting down their plants. Let’s take the deindustrialization of Germany. All of the EV plants are backing off and closing down. You have your parts, and then the other stories are coming in about the mining and everything else. Toyota is not having any of those expenses. So they you take a rent, take a look at in the next two years, Toyota is going to springboard. It’s going to go right on through the roof. You see you heard it here. Second Michael let’s go to the boom in the battery. Boom in the battery metals for EVs is turning to bust. I found this, article fairly, interesting. When we sit back and take a look at everybody was fighting over, I think it’s 80%. Michael, of the critical minerals can be refined or refined in China. So you may be able to be digging them up around the world, but it is, where the technology resides is in China. So you got a ship on the China and then have them refined and then made in other areas. So let’s go to nickel, boom and bust cycles for nickel. Not just as fast and sharply lower metal prices could help automotive companies reignite sales growth by luring by with. The cheaper models and discounts. You and I had talked about this yesterday with the Chinese invasion of the, cheaper models, that they were really trying to bring in here. So this is going into the economics. Is the last paragraph down there, aren’t there until, recently American lithium giant album air, was riding high. Now its shares are down 57%. Michael. From a year ago. [00:10:40][128.0]

Michael Tanner: [00:10:42] Yeah. Well as you said we’ve also seen things like Glencore, BHP they’ve gone ahead and said they’re going to shutter their nickel businesses because it’s just unprofitable. These projects can’t quite ramp up you know. And this is what’s funny is we need to ramp up this volume if we’re moving to EV. So there seems to be a shift. Now the problem is as we covered last week, no one’s buying the EV. So you’re just putting this metal in the cars. And if people are going to stop, if manufacturers are going to start making EVs, then you don’t need any of this. So the EV market is is teetering, right? [00:11:16][34.8]

Stuart Turley: [00:11:17] It is. And and here’s the other thing about this is the second order of magnitude about this energy thread that we’re talking about today is from the standpoint of the renewable, the critical minerals that are needed for it. The prices are going to go up because if they they are in demand more, there’s less mining going on. You’re going to see the, the there’s less mining available for a larger, push for grid updates or other things. So the entire renewable energy transition, as they call it, is in peril. Yep. So let’s go to this other article is electric vehicles are so unpopular, entire mines are shutting down. This one is very, much in the same line. China controls the 87% of the rare earth mineral refining capacity. I already talked about that on. So let’s go ahead and go over to charting the course, U.S. oil production. We did go ahead and cover some of this, already. I wanted to bring that up in the in the standpoint that, not only is King, King Cole going to be around, King oil’s going to be around as well too. And so you take a look at the, daily crude production, 11.94 million barrels for the, U.S. oil tracking indicators like the Fred frack spread count and global economic conditions is crucial for understanding U.S oil production trends. Michael, I do want to ask this question. And that is we know that technology in the AMP space is doing better. So we’re doing more drilling with less rigs. But do you think that there’s too much, dollar put on the number of rigs that are running when they’re trying to price out oil? [00:13:23][125.9]

Michael Tanner: [00:13:24] I guess I’m a little confused in your question. Are you just saying it’s it’s not cost effective to drill new wells? [00:13:29][5.4]

Stuart Turley: [00:13:30] Oh, no. It’s there are less, less rigs running. Yep. And we’re we’re. [00:13:37][6.7]

Michael Tanner: [00:13:37] Getting the same amount of efficiency. Absolutely. [00:13:38][1.4]

Stuart Turley: [00:13:39] And and so there’s actually better efficiencies. Why are we getting the why? [00:13:43][4.1]

Michael Tanner: [00:13:44] The word efficient may be the wrong word. Why are we seeing more production with less rigs? Is that because we’re finding better wells or we’re just now drilling three mile long laterals? So one rig is now, instead of drilling a one mile or a two mile lateral is doing a three mile lateral. What they’re doing up in Colorado is they’re drilling you wells. They come in, they drill down one formation, they go deeper than they turn around. And you’re basically drilling, you know, four mile laterals because of the way you you shape it. So there is a little bit of we actually probably per foot on an EU are basis are seeing less efficient wells, drilling longer wells, which means we can get the same amount of production from less rigs. But as you mentioned, it’s there, it’s a. [00:14:29][45.5]

Stuart Turley: [00:14:29] Little bit of, it’s a play. And I wasn’t even thinking of that. I mean, I honestly, I that did not make sense to me, on that at all. That’s pretty darn cool, dude. [00:14:39][9.4]

Michael Tanner: [00:14:39] Now, the frack spread count is a key indicator of how much available capacity do we have to bring on new production? Because most wells, you can’t just drill pull tools out of the hole and you start seeing oil most. You got to frack these bad boys, I mean ice, but those have all been drilled up. So with only about, you know, with 75% of the equipment currently in use, what does that mean? That means there’s only incrementally maybe 20, you know, maybe 15% more. That could be, you know, more equipment. Being used. What is that relative to new production versus old production? Falling off line? It’s a completely hairy beast. But the more frac spread, you know, the smaller that frac spread is. Excuse me. Is the is an indicator of how quickly production can be ramped up? [00:15:28][48.9]

Stuart Turley: [00:15:29] I like that. I was not even thinking that way. See, that’s. You’re the boots on the ground and I’m the boots in the cloud. So, hey, you gotta gotta. [00:15:38][9.7]

Michael Tanner: [00:15:38] Pull it off. [00:15:39][0.3]

Stuart Turley: [00:15:39] Hey, let’s go to the ban on LNG exports could boost carbon emissions. This is just absolutely pathetic when you actually sit back and, President Biden, this is in the third paragraph down or, fourth paragraph. President Biden announced a temporary pause on pending approvals of liquefied natural gas exports. This announcement comes on the heels of news that 2023 surpassed, Cutter and Australia become the world’s two largest LNG, export. Now, here’s where this goes in. How it could is if we go through the single biggest reason for this decline was natural gas, displacing coal production in 2007. Coal had more than a 40% share of all power production, while natural gas only held a 20% by 2022. Coal had been given displaced by natural gas. Coal had fallen to 20% and the natural gas had increased to 40. They flip in those years from 2020, 7 or 20 oh 7 to 2022. They’d flipped. That’s nuts. [00:17:00][80.1]

Michael Tanner: [00:17:00] Yeah, I think this this ban on LNG is probably it’s a temporary pause. What does that mean? They may or may not be able to reverse it. It’s stupid. [00:17:11][10.5]

Stuart Turley: [00:17:11] It’s placating his base. And it is. [00:17:14][3.0]

Michael Tanner: [00:17:15] Weaponizing something for you know, if this wasn’t a a this if this wasn’t a voting season, we didn’t have to show up to the ballot box in November. You may or you probably don’t see this happen. In my opinion. I think this they’re weaponizing the energy industry because they feel like it’s the one thing they they, they may be able to to win over independents on. [00:17:34][19.8]

Stuart Turley: [00:17:35] And I think it’s despicable. And, and and it the second order of magnitude on this is I would not want to do business with the U.S. because all of a sudden Biden said a year ago, oh, I will give you all the LNG you want. Not today. And now he’s the LNG soup Nazi of Seinfeld. No, no, no, no LNG for you. [00:18:02][26.8]

Michael Tanner: [00:18:04] Do you have anything else? No. [00:18:05][1.1]

Stuart Turley: [00:18:06] I had a real roll on a thread today. [00:18:08][2.5]

Michael Tanner: [00:18:09] Absolutely. Before we jump over to finance quickly, we’ll go ahead and pay the bills here. As always, guys, the news and analysis, that you’re hearing is brought to you by the world’s greatest website, energy newsbeat.com. The best place for all of your, energy and oil and gas news. Doing the team do a tremendous job making sure this website is up to speed. Everything you need to know to be the tip of the spear when it comes to the energy business. Hit the description below. Go ahead and, find links to all of the articles that you just heard. Links to our website, links to those articles, links to the transcripts. You can also check us out. Dashboard.EnergyNewsBeat.com the best place for all your data and news. A lot of great stuff come in here. And a Q1 beginning of Q2 for, for the energy news beat. So very excited about that. [00:18:55][45.8]

Michael Tanner: [00:18:55] But let’s go ahead and move on over into oil, into the oil markets. I mean, overall markets were closed today. Guys. It’s President’s Day. So we saw nothing really change. We did see futures stay basically flat for both the S&P 500 and Nasdaq. we did see crude oil drop and then gain a little bit. I mean again, everything right now that you’re seeing specifically with the overall markets closed close had a lot to do with what’s going on geopolitically. And you can see people are swinging back and forth, you know, in in a smaller session, than normal considering it’s a, it’s a holiday here US Presidents Day. You know, there’s a lot of, you know, we would say thinner volumes. And that mainly means that volume precedes price. So if you have low volume, price doesn’t move that much. So when when you hear somebody talk about there was thin volume on the market, they that’s a code word for nobody was trading. And that means prices didn’t do much. We see saw it a little bit. You know, we did see the settle for West Texas Intermediate 7949. That’s up still by about $0.30. So not horrible. You know the the the, delivery for the April contract was down to to 78, 35, you know, mainly what, you know, the, the Middle East, the, the conflict there between. Israel and Gaza continues to kind of claim a lot of what’s going on with the swing of the oil markets. We also did see some houses over in Yemen claim responsibility for attack on an India bound oil tanker. So they, you know, they they’re going after. [00:20:24][88.4]

Stuart Turley: [00:20:24] Another cargo ship and they had to abandon the cargo ship. The terrorism. [00:20:29][5.0]

Michael Tanner: [00:20:30] And what is it? Abandoned faith. All ye. What is it? What is that? Oh, what is that classic pirate phrase where it’s like, abandon hope. Ye. It’s something like that. [00:20:40][10.1]

Stuart Turley: [00:20:41] Oh, I don’t know. I was just thinking. A hoodie and the blowfish, you know, some of their songs, so I don’t know. You and I are on different wavelengths that we are. [00:20:49][8.0]

Michael Tanner: [00:20:49] Not much happened again, guys. With the markets being closed, we did not see any earnings. We are going to see a Bolo roll out over the next few days. So go ahead and stay with us. But I’m going to let us out early because why keep us if we’ve got if there was no markets closed? Yeah. You’ll see today the API in the afternoon we’ll go ahead and announce its, its crude oil inventory stock. So check out that and we will also, hopefully see an update on, in the next couple of weeks, we are going to see really what happens, to the fed, given the fallout from, both CPI in the, in the producer price index being up. [00:21:25][36.0]

Stuart Turley: [00:21:26] Hey, Michael, I do want to ask folks to get in touch with us, because when you and I started, what, three years ago or whenever it was, we did. [00:21:35][9.1]

Michael Tanner: [00:21:35] Regime. [00:21:35][0.0]

Stuart Turley: [00:21:36] The regime, we had live, shows that got to huge, and I just want to see if everybody wants us to go back to live. So give us some feedback. We want to know, what your thoughts are since we have so many beloved fans. [00:21:52][15.8]

Michael Tanner: [00:21:53] Live would be interesting. I do. Luckily, we we mainly do this in one take, except for sometimes the intros. Takes it takes 1 or 2 to. [00:22:01][8.1]

Stuart Turley: [00:22:01] For our inside baseball, it’s when H.R. or Michael does not like my jokes. [00:22:07][5.6]

Michael Tanner: [00:22:08] Usually. Usually. That’s the problem with live stew. We’re gonna have to hold you back a little bit. You get saved by the editing. Now you get saved by the editing. [00:22:16][7.8]

Stuart Turley: [00:22:19] So. [00:22:19][0.0]

Michael Tanner: [00:22:20] All right, guys, we’ll let you get out of here, leave us some feedback. Emailed the show questions at news B.Com or Stuart Turley I’m Michael Tanner. We’ll see you tomorrow folks. [00:22:20][0.0][1296.3]

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