The Boom Sowed Seeds Of Scarcity

Hinzugefügt: 2026-05-17

[00:00:00]Nothing in this program should be considered investment advice. It is for educational purposes only. Please hit pause and read this disclaimer in full.

[00:00:09]We're going from an era of abundance driven by a huge capital boom 10 years prior in the shales that brought on the abundance that led to low prices that led to a der of capital or a lack of capital which is now having a supply response. That's the commodity cycle and I think we're in the process of inflecting towards a major bull move.

[00:00:39]Adam, I would like to now turn to natural gas if we could. Um, this is a fascinating story. So for everybody listening, we're talking with Adam Rosenwag of Garing and Roenwag and uh discussing their most recent quarterly report. And now can we talk natural gas for just a sec? Um so hey here's you know 2022 again that famous period we saw natural gas 6 7 8 9 even touching 10 briefly. This is weather in the yellow here. This is the behavior of natural gas in the US since the war started which is here in March. It's down. Um so not much going on there. And of course we can see just nothing but lots of demand. These are in billions of cubic feet per day. And this is again from your report pulled from the EIA. Look at all these LNG plants coming online. It's about 13 BCF by 2030 additional. So it's about 4 BCF per year give or take. Um so just holding that four number in line.

[00:01:35]And I read stuff like this every day. So um Garb uh Chakraarti was pointing out that Chevron is now going to sell natural gas not to chemical plants.

[00:01:43]They're building a 5 gawatt a 5 gawatt that's like five Denvers of demand. 5 gawatt gas power plant for Microsoft. So I ran the numbers and it turns out that that one plant for Microsoft is going to consume about 75% of current daily marketed dry gas production. It's about somewhere in the vicinity of 08 BCF per day. Um and there's data centers going in all over the place. So we have LG terminals, we've got this demand. My question is is anybody adding this up because it it feels like there's a problem here. And when you point out where our shale gas growth has been since 2023, it's again the perian more than more than making up for all other shales. And actually when you sum them, you get the pretty close to flat on the past year, don't you?

[00:02:30]>> Yeah, you do. And um you know the perian is going through what we call this gas burp, which means is the perian you know the perian's not purely unique but but a little bit different in terms of a gas field. that produces oil and gas coingled together. And as the well, any given well in the perian gets older, it's going to produce more gas relative to oil compared to how it started out, it's going to get gassier. And eventually the pressure lessens so much that the gas and the oil actually separate like a can of soda after you've opened it or a bottle of beer. Um, and you know, the gas when it's sealed under pressure, the gas is dissolved in the liquid. And when you release the pressure, they begin to separate and one flows. And so Eventually as these wells get older and this the pressure comes down you flow gas preferentially towards the end it gets gassier.

[00:03:19]Now when the perian was growing its wells on average were getting younger the you know the the production weighted average age of a well was was getting younger as you drilled more and more and more. That's now begun to change because the field and on its oil side of things has basically kind of plateaued, right? looks like it's turned negative turning negative year on year which means the wells are getting older and older and gassier and gassier so you get this big kind of gas rush out of the perian uh is that is that meaningful impactful I mean it is but it's also a bit of a swan song it's telling you the field's getting awfully old and and and most importantly does not go on forever and so when does it actually start to roll over entirely is it this year or next year my guess is probably the end of this year beginning part of next year and take that with a grain of salt cuz I tend to be a little bit early on things. So, I think the perian is going to sort of have this this wake up moment within the next two years. Let's say that for certain. In the meantime, the rest of the shes are all declining, you know, relatively sharply. Even the Marcelus has been now flat for about 3 years and we're going gang busters on our exports. Absolutely gang busters. So, what gives? Why are prices stuck where they are today? 20% of LNG is now also trapped in the straight of Hormuz and we're having major problems with gas supplies around the world and and frankly the reason that we're not seeing an impact in the US is that the export terminals were full in January before straight closure and they're full now. So we're just exporting right someone's taking advantage of that huge discrepancy but it's not like we can respond and push more gas out of the country um to make up for the lost volumes in the straight.

[00:05:03]So, so we're still pooling gas back in the United States. We had more or less a normal winter. Uh, on a normal winter, we took inventories down. That tells me that we're in a structural deficit in gas prices, right? On if you have normal weather and inventories stay flat, seasonally adjusted, that would tell me we're balanced. If you have normal weather and they build, that tells me you're in surplus. And if you have normal weather and they draw, it tells me you're in deficit. So, I think we're in deficit. We had a normal winter and inventories went from well above average back down to average. They're still not a dangerously low levels by any stretch of the imagination, but there we've worked off a lot of that overhang. And I think the path forward is going to be continue to be one you think of of convergence uh between the US price and global price which could be you know multiples of where we see it today. Uh this has been a very frustrating trade for us. it's it's taken a lot longer. Uh mostly subject to weather uh disappointments and then a little bit to you know some stubborn production that's taken a bit longer to to slow and roll over than we would have expected but still you're not seeing like you know fabulous growth anywhere outside of the perian because of the reasons that we just talked about. So to answer your question or what are they thinking and will they are they adding up the numbers I think the short answer is no they're not. And before you call, I'm not saying you before one calls anybody you know names and say how could they be so foolish you know you have to appreciate the huge magnitude of what the shells did in gas in many ways the disruption to the US gas market from shale gas was far greater than shale oil uh we brought on you know 95 plus billion cubic feet per day of new gas from shale uh divide that by six and that's your oil equivalent you're talking 18ish ish million barrel and 16 million barrels of oil equivalent far in excess of what we brought on on the actual oil side. Uh and you know we threw the kitchen sink at this thing.

[00:07:07]You know we converted a lot of our coal plants to gas. We built all this prochemical industry. We built a huge export business. Um we laid down already a lot of data centers and fertilizer plants and we've still been able to produce more than we've needed. So to some on some level I suppose I can empathize with the developer whether it's a data center developer, a pipeline developer, what have you that kind of says look I think the gas we have it in hand. Uh but maybe I'm being too kind because it's ultimately is a really really big blind spot when you talk to these guys. No, they don't care. I mean that's the short answer. They they say we worry about a lot of things. We don't worry about the gas. Go to Europe. It's a totally different story. It's a totally different story. Everyone's worried about the gas um because you know first they had their disrupted supplies from Russia. They had to go to the LG market to buy it. Now a bunch of the LG in the world is tied up in the straight of Hormuz. So Asia's bidding that desperately away and you know finding molecules of energy in Europe is challenging and you feel it when you talk to the people they feel it. We in America tend to be focused at the prices about the price at the pump. You know, I think very much the American psyche is is tied around that gasoline price. Uh, and they don't have any idea what natural gas costs and I don't think that will last for very long.

[00:08:35]>> Now, when I look at the EIA's projections, they they merily show us going from I'm rounding here about 100 100 BCF um up to 150 by 2050.

[00:08:46]Where where's that where's that gas coming from in their minds? Look, again, I I I just don't see it because if you look at shale gas fields, uh we're going to take away the ones that are growing, but let's just look at the bulk of them in numbers. You know, most of them have peaked and rolled over and done so quite violently. The Barnett is down 50%, the Fagetville down 60% or so. The Marcelis down now peaked for 3 years. Some people say it just needs more pipelines, but you know, we added a big pipeline last year. We didn't get a huge upsurge in volumes. It's again sort of just flat through that. Uh so I think it's making this big prolonged kind of top before it too begins to roll over. Um you know will it come from the Udica? People have been trying out the Udica for a while now. Do they get results? Yeah, there's some results. But when you start to lose really prolific fields and you backfill them with more challenging fields, that's never the recipe for new highs.

[00:09:42]you need to get a new field that is on par with the Marcellus and the Perian to replace the Marcelus and the Perian if you want to start to see any material growth. And again, just like the shale oil, I don't see where that will come from. Um, there's some opportunities in in Canada. Uh, and look, you know, I debated uh Doomberg, who's an energy analyst on Substack a couple years ago.

[00:10:04]And and you know, it was more of a semantic fight honestly than it was a true intellectual debate because, you know, at a certain point, he said, well, you know, in 10 years time, do you think we're going to consume more oil or less?

[00:10:16]And trying to say, do you think the world economy will be greater or smaller? I think it'll be greater. I think we'll consume more, which of course means we have to be producing more. Uh so you know this is not sort of a Malthusian call that we're running out of everything and we're going to have to sort of shut the lights off. What it means is that easily dispatched unit of marginal growth becomes harder and harder to find and that's what resets prices higher. So will where will it come from? You know I'm sure your viewers and listeners will post in their comments a list of fields that it will come from. I'm sure it will. My point is we're going from an era of abundance driven by a huge capital boom 10 years prior in the shelves that brought on the abundance that led to low prices that led to a der of capital or a lack of capital which is now having a supply response. That's the commodity cycle and I think we're in the process of inflecting towards a major bull move.

[00:11:14]>> Understood. And just to really clarify this for people, um, when we say the Perian, it's actually three formations in the Perian that we're down to. The Wolf Camp, the Bone Spring, and the Strawberry. All others are just that little blue smear at the top. Really, the Wolf Camp's doing the heavy lifting on this whole thing. So, um, again, you know, some people look at this and say, "Wow, look at all that that gas growth.

[00:11:35]We'll just keep growing that forever."

[00:11:37]But what you said before is this is actually indicative of a shale play that's starting to bubble out.

[00:11:42]>> I think that's right. and and and you know it it's very funny because a number of years ago um Pioneer Natural Resources which was a big Peran producer later acquired by Exxon they had a single quarter where their gas to oil ratio went up and I was astonished at how many people came out of the woodwork talking about bubble points and gas oil ratios and retrograde condensate and we really thought it was a a fairly esoteric you know in the weeds kind of technical thing. Everybody became consumed with that and they used it as an excuse to sell off their pioneer or go actively short. Uh and of course that kind of worked itself out.

[00:12:20]This is years ago. The field was not depleting yet. And we wrote at the time said I don't think this is a problem because the field's not depleting and the go issues. You should expect to see them down the line. Uh so that was sort of a a false start you know for the bubble point people and and we never thought that that was a issue then but I think it is now. Uh I think it is because if you look at the again the total recoverable reserves the way we estimate them which is a bit of an art and a bit of a science we're much farther along clearly in the life of that play uh by definition I guess every day or day older but but I think you can make a we can make anyway a very credible claim that you are now at a point in time that you should expect to see a a bubbling out as you put it and sure enough you're you're seeing that.

[00:13:03]So again, that's not the sign of a um healthy young field in growth. What it really is is it's sort of uh you know, the swan song. It's the you know, your old granny getting a a burst of uh energy sort of right before right before she croakkes. Uh not to be too crude, >> today's markets are more volatile than ever with ongoing economic and geopolitical uncertainty. Navigating such environments requires thoughtful, adaptive strategies, not a one-sizefits-all approach. At Peak Financial Investing, our registered investment advisory firm connects clients with experienced wealth managers who focus on active portfolio management. These professionals use evidence-based strategies designed to respond to changing conditions, not outdated formulas, but customized approaches grounded in research, discipline, and risk awareness. We believe in open, informed conversations, including discussing tools like precious metals and diversification as part of a broader financial strategy. Every investor's situation is unique, and our adviserss tailor their guidance accordingly. Visit peakfinaniinvesting.com today to schedule your free consultation and explore how proactive management can support your financial goals. I'm Dr. Chris Martinson, proud to work with Peak Financial Investing and my support reflects my professional views. I encourage you to take control of your financial future by making informed decisions.

[00:14:40]The wild card for me in this is the data centers because I don't it's just all anecdotes. I mean I have to pull individual reports. I can't find anybody who's aggregating this at either the state or national levels.

[00:14:50]>> I agree.

[00:14:50]>> So I read about a big data center in Texas and one in Illinois and what so I start mentally adding them up. But with that one Microsoft one I mentioned at 75% if you had a hundred of those you're consuming 75%. Right? So obviously we're not going to have a hundred data centers of that magnitude but there are thousands of data centers going in which are largely take natural gas whether they burn it themselves or they tap into an electric grid that's burning it they're making a demand call on natural gas. Oh, absolutely. No two ways about it. And you know, a lot of these tech companies are talking about nuclear to power their data centers, but that's not going to be until the 2030s. And so, to the extent that they want to have growth now, which they all of course do, um there you need gas to bridge it or coal.

[00:15:35]Coal could do it too. Uh I don't think there's a big appetite for that. I think certainly there's you would prefer to burn the gas that seems to be today readily available, abundant, and cheap, right? And clean. Um, it's not going to be renewables. It cannot be for a variety of reasons we probably don't have time to get into here, but it will be natural gas will be the huge beneficiary. And like you said, it's either going to be off the grid or behind the meter, which means, you know, colllocated on site, completely irrelevant from a gas perspective, whether you go through a regulated utility. Uh, you know, a gas molecule as it's being burned and spinning. uh a CCGT turbine doesn't care if it's behind the meter or in front of the meter one bit. Uh and so yeah, it's a massive massive number. Now, to your point, nobody knows where any of this stuff is going to settle out. Uh and I wouldn't, you know, necessarily want to make a gas bet predicated only on data centers, but you don't have to.

[00:16:31]You know, the market is relatively tight today. Again, inventories have come down. and they're not at dangerous levels, but relatively to a relative to averages, they've come way way down on fairly normal weather. Um, prices sold off, by the way. You had that chart up before about a 12-month period, they sold off because it had a very mild end of February, March, very, very mild and benign. Um, cold enough that air conditioning demand didn't kick in and warm enough that heating demand wasn't necessary. It was quite a lovely period.

[00:16:59]Uh, but, you know, not great for for gas demand. Um and so of course weather will always remain the wild card but uh on normal weather I think you just keep tightening this market. You keep tightening it. You keep tightening it.

[00:17:14]And um it it is probably on on a percent move you know from here right with gas sub3 bucks. Could it get to 10? It's going to get to 10 before oil gets to 300. I think that's for sure.

[00:17:28]>> Well I'm I'm going to continue to watch uh the flat production like a hawk. Um because I if it stays flat, I'm I'm just going to be like, well, it's staying flat for some reasons. And the reason is probably because we're not producing more. And is that just a shortage of drill wigs, takeaway capacity, or is it that things are rolling over and the gains out of the Perian are no longer keeping pace with the losses from other areas? Don't know. But I see a setup here that's exceedingly bullish when we look at all the all the calls on demand.

[00:17:55]>> I do as well. Well, sorry. Just one thing that that I'll say just quickly.

[00:17:58]You know, it's it's hard sometimes for people and myself and anybody to think in terms of exponential decays and differential equations. And that's really what you're working on here because you have a well that comes on, that well begins to decay exponentially almost at once. Then you have every well comes on is a little bit less productive than the one that came on before it. Uh you have wells that are getting older.

[00:18:25]So getting gassier but getting less productive in general. And so it's all these kind of opposing forces all operating in exponential space not in linear space. And it's really hard to kind of wrap your head around it. But but it turns out it's actually quite straightforward to model, you know, on Excel or on a on a computer program. And and what it suggests is that you're getting awfully close to this period where gas supply in general will stop growing and demand is just going gang busters. It's just going gang busters.

[00:18:54]And so yeah, that sets up for the market that we love to get involved in. One that's been completely starved of capital. One that uh is has a narrative, a b a bearish narrative embedded in it.

[00:19:06]In this case, I would say it it's uh best summed up by the doomberg adage of sort of we have an unlimited amount of gas. And on the way up, it unlimited growth feels like it's unlimited as it's growing. Uh it's not until it stops growing that it feels awfully difficult to come by. And um when you can find areas like that star for capital based around a bearish narrative that's ultimately incorrect and the fundamentals are about to turn. I mean if you can just really lean into that you can make a huge amount uh of there's a huge amount of value and that's what we try our best to focus on and sometimes the calls can be stubborn but but usually over the long term they can be very very fruitful. Everyone, we've been talking with Adam Rosenwag of Garing and Rosenwag. Go to go roen g o r o zn.com to find their uh quarterly missives. I they are must readads. I never miss them. They're thoughtful and uh thoughtprovoking. And so, Adam, thank you so much for your time today. Is there anything else you would like to direct people to?

[00:20:10]>> No, I think that's it. You know, I think just to reiterate, I think we're in the early stages here of a bull market. uh out of all the commodities people talk about we get asked do we miss it etc. You know three commodities made new nominal highs one made a new real high and that's gold. Uh the other 46 are still below their past nominal peaks and well below their real peaks. So look you know flows of funds into the industry have been anemic. Uh even in gold frankly has been anemic into gold miners. Um, but I think that I think that we are very early days across most commodities here. Uh, maybe with the exception of gold, I think that could trade sideways for a while, but most of the other ones look look awfully bullish to us, and I think there's going to be a huge huge opportunity for investors that decide to make their moves now.

[00:21:02]>> Excellent. Well, Adam, thanks again.

[00:21:03]Really appreciate your time and and knowledge on all of this.

[00:21:06]>> Thank you.