Wait Patiently While The Trap Sets Itself

Added: 2026-05-09

[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]And we told people, while it might sound sort of foolish, just wait a little bit.

[00:00:12]Just wait for this to work itself through. You're going to realize it one way or another. You can either benefit from it or respond to it later.

[00:00:27]Hello everyone and welcome to this very special edition of FinanceU. I'm your host Chris Martinson and today we're going to be talking about oil other things related to the straight being closed and we're going to be talking about it with Adam Rosenwag of Garing and Rosenwag the natural resources investors. Obviously, always a very compelling, action-packed, uh, datari conversation, but it's more important than ever because I believe, and we'll see what Adam thinks about this, that our markets are not yet pricing in the greatest energy shock in all of history.

[00:00:56]So, Adam, uh, welcome back.

[00:01:00]>> Yeah, wonderful to talk to you again.

[00:01:01]How are you? I'm I'm doing really well, but I'm I have to confess I have a little disorientation around how I'm watching the markets behave compared to what even Faty B-roll of the IEA said that this crisis is larger than 73,81 and 2022 all combined. What's your assessment?

[00:01:21]>> I I think that's certainly correct. When you look at the physical volumes that we're talking about here that are being disrupted, I mean, they're really uh larger than anything we've seen before.

[00:01:31]So I think in that regard absolutely uh correct and I think that the question we get asked over and over again uh is simply you know how can the market uh be so asleep uh at this level um you know indices are making all-time highs uh inflationary pressures now just this week we've we've seen some readings um that we might be getting uh rate hikes at some point to address the uh likely forthcoming scary inflation prints. But I mean, quite frankly, given how inflation works formulaically with a lag, I think anybody that was watching this market knew that that was on the horizon the minute that the straight closed. Uh, and particularly now that it's been closed for this long, I think the market in general, energy markets in particular, uh, are about as complacent as I can remember in the face of a massive shock.

[00:02:27]Yeah, I think the March PCE personal consumption expenditure came in at 0.7, which if you analyze it, if you could, it's 8% inflation. Um, that's not consistent with cutting rates obviously.

[00:02:38]But I guess the story is the narrative is, well, this will all be over soon.

[00:02:42]So, I do want to dive into that because Goldman Sachs put out an analysis and said, well, you know, we get back up to 70% after 3 months of the straight being reopened and then next 3 months we get up to 88%. But if you run the math, still missing 88% of 25 million barrels per day of oil and products is still a 2.9 million barrel shortfall after 6 months. That that's astonishing.

[00:03:06]>> Yeah, absolutely. Look, I think the math that the market is doing um which we've long disagreed with. We disagreed with it in January before this straight was closed, but I think the math that the market is doing is basically the following. Uh if you believed the headline numbers back in January, we were in a 2 million barrel a day surplus last year going to a 3 million barrel a day surplus this year. The straight of Hormuz, as we now all know, we've all come up to speed very quickly. I I will admit I knew this long before, but the rest of the world, it sort of reminds me of those COVID charts that everyone became an expert in very very quickly.

[00:03:44]Exponential growth very fast. Um the funniest of which was uh uh the chart of googling exponential growth which itself was an exponential growth chart. Uh and so now it's the straight of Hormuz. Uh but as we all now know 20 million barrels a day transited through that straight uh before February 28th. Some amount of oil is getting out via the Red Sea in the East West by bypass pipeline.

[00:04:11]Probably one of the most sensitive and strategic assets in the world right now I suspect. and some getting out through Iraq via Turkey and some through the UAE via Turkey and then some was getting out from Iranian production itself now subject of course to the US blockade of this trade. Um so we're impacting somewhere between 10 and 12 million barrels. That seems to be people's best guess and you know to a certain extent it is a little bit of a guess but it's certainly not less than that. And so if you're at 10 to 12 million barrels a day times 8 weeks in counting, uh you're talking about a billion barrels or so or certainly on our way to a billion barrels of of oil that's just lost from the market. Now it's not lost forever.

[00:04:57]The straight of course will reopen. Uh oil will flow uh again. That's not the last time we've ever used the straight of Hormuz and the Persian Gulf. Uh, however, when you turn the tabs back on, you're not going to make up that difference.

[00:05:11]What essentially you're going to do to simplify things a lot is you're going to, you know, extend the life of these fields by 6 weeks, you know, so sometime in the future they'll go on about a month longer than they ought to have, more or less. Uh, and so I think what the market is kind of saying is that things will get back on on a daily rate largely to where they were in January.

[00:05:33]Once the situation resolves itself, we'll have a blown aole of about a billion barrels in global storage and we'll be back on track to 3 million barrel per day surplus, which means that in 300 odd days, we'll be refilled the inventories to where we were. And so, you know, maybe it's not January 27 anymore, but second quarter 27, everything's back to normal. And, you know, maybe geopolitical premiums have gone up a bit. So instead of $50, you're talking 6065 on the long end of the curve. And that's sort of where everything is settled out right now. The problem with that math though is that we never believed we had a surplus. In fact, you had a 2 million barrel per day surplus, alleged surplus last year, which means over the course of the year, we should have built inventories by about 730 million barrels. And of course, we didn't build them by anything or next to nothing. And so we've always been of the contend of the belief that in fact we were pretty well balanced last year and we were pretty well balanced despite the fact that OPEC was producing uh an extra 2.5 million or the quotas up 2 and a half million production up about 2 million barrels a day over the course of the year. All of it absorbed all of it absorbed. So we actually repositioned the portfolio in January with much more of an oil focus.

[00:06:49]The idea being you were offered very very low nominal prices for crude, near record low real prices for crude and absolute record low prices for crude relative to gold. Um predicated on this horrible surplus that we didn't believe was actually true. So that's why we liked it. And today, uh, I think all you've done with the closure of the straight is is you've lit the fuse on this bull market. You have taken inventories down sharply to to what is now, I can only describe as what will be dangerously low levels. And by the way, we haven't even seen that begin to happen yet because we're more or less still discharging um tankers that were filled, you know, just before the closure of this trade.

[00:07:39]That's now behind us. And so now the apparent shortfall is really going to make itself felt physically. Uh so inventories are going to come down. The street's going to reopen. Everyone is going to say, "Okay, let's track how quickly these inventories fill back up again." And I just fear that they're not going to. And that's when uh the speculative energy comes into the space.

[00:08:00]That's when the long end of the curve lifts up. Um it might stay backwardated uh because it's a tight market, but it the whole curve will lift up. And I think you need to put a h 100red bucks on the long end of the curve to incentivize companies to raise capital and start developing new projects again.

[00:08:15]None of that's going to happen while this trait is closed because everyone's reacting today. The spot price will move up and down on tweets and news flow. Any piece of data that comes out will effectively be thrown in the trash bin and written off as um you know essentially uh extraordinary and one time in nature. You know, so if you got a big uh IEA report for instance that showed the world was all a muck, well, I mean, I think everyone says, "Yeah, fine. That's happening now. Let's look forward. Let's look through this."

[00:08:46]And I think it takes the straight reopening and that not playing out, that refilling inventories to really get people going in this market.

[00:08:54]>> Well, indeed, so much to unpack there.

[00:08:56]Uh, I heard that Trump just recently said that um Exxon and Chevron refused to pump more oil and they're of course looking out on the long end of the curve and seeing $70 oil. That's not going to it's not going to get them out of their seats to pump more oil. That's just the reality of it, right?

[00:09:12]>> No, I think that's absolutely right. You know, people have said, why don't the shale guys get working again? And I know we're going to talk about shale in a second. And um shale is short cycle, right? So, it can be brought online relatively quickly, but these companies don't have a good inventory of tier one wells anymore. They've drilled them all.

[00:09:27]And so, uh, they're they're suffering depletion. Doesn't mean they won't increase their activity, but it means that we won't get the same response that we're used to getting. And you're certainly not going to get it at $70 uh crude on the longer end of the curve, which is essentially where they need to hedge it out in order to, you know, set their drilling budgets and pay their crews and, you know, have have have good uh working capital needs for for their counterparties. So, no, it just doesn't work at these prices and it needs to lift materially uh higher. And the Exon Exxons and the Chevrons of the world, if you're not talking about Shell, I mean, they need much much higher prices. You know, I think uh we've all been sort of lulled, right, into this sense of easy oil because of how prolific the shells have been. And I just want to kind of throw some numbers quickly at you. You know, the shells grew their production by 13 million barrels over 10 or 12 or 15 years, depends where you want to start the point. Um, unbelievable, unbelievable. I mean, Saudi took them decades to get up to 10 million barrels a day. And and I think the most interesting example is when you're talking about, you know, Venezuela and what's going to happen there. And, you know, in the best case scenario, they're going to add 1 million barrels per day uh in the next three to five years at a cost of somewhere between 100 to 150 billion dollars. You know, it's a $100,000 flowing barrel oil. The Emiratis are the same. They of course left OPEC this week. And with that, people have been saying, well, yeah, they want to increase their production because they spent $150 billion dollars over the last several years and they have a million barrels of spare capacity to show for it. I mean, my god is that expensive oil and that's now becoming the marginal barrel. So, that's where the market ultimately should price and you need $100 oil to make that work at a minimum.

[00:11:15]>> Indeed. So, here's where um we're going to discuss here today uh when the straight closed, which is your most recent quarterly output. I think it came out March 12th. So obviously a lot has happened uh since then. You people can find it at gorosen.com.

[00:11:29]But I guess I want to start here, Adam.

[00:11:31]This is today. Um so we're recording this on May 1st and we had very typical Friday. Some news came out. It was a sort of an unconfirmed report that Pakistan had received a courier that that was Iran's latest proposal for ceasefire negotiations. And so next thing you know, we're just watching like massive amounts of oil get sold and dumped off. And I just want to contrast that very quickly. I know you can do this better than anybody seeing this behavior. I'm so old. I remember 2022.

[00:12:00]So, here we had this uh attack of Ukraine by Russia. And what I've indicated in yellow is is 5 months where oil spiked just on the idea that some Russian oil would get sanctioned. We not even we hadn't even gotten to the point where we're seeing today the actual destruction of physical Russian oil export assets. And that was a market response to something that was a fraction of the size of what we're actually experiencing today. How do you make sense of that?

[00:12:29]>> Oh, you know, I I think that in general, people just have not been paying attention to the energy markets. I think back in 2020 uh with COVID and oil prices went negative perhaps we were slightly more fragile across the energy spectrum because um you know that that was obviously a huge shock to the system a huge bearish shock and then you followed that up almost immediately right with uh demand that picked up faster than anyone expected and then the threat of Russian volumes coming off the market perhaps that explains why you got a bigger response then I mean look you are getting a response in the spot price today. Um yes, you picked today's chart to look at and showing news flow and it's trading down etc. But you know in general we have seen dated Brent you know trade up to an all-time high at 145. So the physical traders do know that there's a problem here, but it's just not translated into the long end of the curve and it's not traded in uh priced in to the stocks and it's not priced into the broad market and and I think that the magnitude of today versus 2022 is night and day. As you mentioned, 2022 was done uh with a bit of fear about what could happen. Ultimately, Russian volumes were not really impaired and taken off the market. They maybe went underground a little bit and became sanctioned and harder to track. We didn't lose material Russian supply.

[00:13:53]Today, we're seeing, you know, on the order of 10 plus million barrels of of real disruption. I mean, you could just you can track it. You can see that that oil is not going out. And that's just a very very different situation. And so it reminds me a little bit of what we saw in the gold market back in 2022, 2023, excuse me, when inflation pressures were high, central banks started to step in and the stocks didn't really move and you didn't have any speculative energy in gold quite yet. And we told people, while it might sound sort of foolish, just wait a little bit. Just wait for this to work itself through. You're going to realize it one way or another.

[00:14:33]You can either benefit from it or respond to it later.

[00:14:38]>> 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.

[00:14:52]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 advisers tailor their guidance accordingly. Visit peakfinancialinvesting.com today to schedule your free consultation and explore how proactive management can support your financial goals. I'm Dr. 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.

[00:15:55]There is a ticking clock in this and so we've we've talked as if the straight opens up relatively soon and maybe it does, maybe it doesn't, but the ticking clock for me was contained in this chart by JP Morgan's commodities research and um combining some sources. But what we're looking at here is OECD commercial crude inventories and then expressing in terms of days of inventories. Um, and it turns the JPM forecast said, "Wow, they could see us getting back to the bad old days of 2008, you know, where again, you know, there was no super crisis at that point cuz this is before the GFC got kicked off, but you know, five out of six quarters there was like slightly less supply than demand and that was enough to spike oil then to 147 a barrel. Today, whatever that is, 220 something. But they're forecasting we're going to get there and exceed that already. And if the straight stays closed for another month or two, we'll exceed that by a lot. Um, do do you do how do you do you square up with this? I mean, is this an important chart for people to >> Absolutely. Look, this is a major major major problem. I want to be really emphatic. You know, perhaps I'm talking calmly and slowly on a quiet Friday here in May, but this is a major problem and this doesn't resolve itself perfectly. I mean, as everyone knows, if the straight opens tomorrow, the same way that we're receiving cargos now that were loaded six plus weeks ago, if the straight opens tomorrow, that oil won't reach the terminals for 6 weeks from the day you start loading it. These tankers go 3,000 plus nautical miles basically at the speed of a bicycle, you know. So, it takes a long time to move this stuff around the world. The damage is absolutely catastrophic. Do we have oil in inventory? Yeah, we have some. You know, we obviously have 4 billion barrels or so in OECD inventories.

[00:17:46]That's commercial plus strategic. We're releasing 400, you know, basically a third of the global strategic oil reserves into the market. But I can bet you anything countries will have learned after this, you probably want to refill those again. Um, a huge part of the global oil inventory is not really sort of sitting there available for use. It's in pipelines and sitting at refinery gate uh storage tanks, things of that nature. It's more working capital than true inventory.

[00:18:18]It's more like your again working capital than your checking account, uh, if you will. uh and so this is a major major problem and I think what's really interesting uh particularly for markets and particularly for those of us sitting in North America uh we've heard a lot that because of the shells resilience etc etc the United States is in a much better position than they would have been in years past where they were much more dependent on international middle eastern oil and there's some truth to that uh from a physical side but it doesn't help us with price because of course oil is a global commodity. uh unlike gas that has big infrastructure bottlenecks that might stop you know it might dislocate US gas from world prices with crude oil the whole system has to stay in a relatively tight band because push comes to shove you buy it in the cheaper area and ship it off to the area where it's more uh expensive right and so we're seeing that here in the United States prices are high and going higher uh but we have the physical oil and I think to put it in perspective particularly For the North American viewers or listeners, I got back from Europe last week and and they're worried. And I think all you have to do is look at the behavior of United Airlines and Lufanza. Both of them are subject to the same crisis in Iran. Both of them appreciate that prices are going up. But for United, they feel confident they can get the jet fuel. So what did they do? They increased the price of their tickets over the summer months by 30%. and I suspect we'll see them go up more. What did Lufansza do? They canceled 20,000 flights. It's not a question of price.

[00:20:02]They don't think that they can get to physical availability. Uh furthermore, I think because of the physical dislocations here, uh we could see a massive massive potential spike in spot oil. I don't know that or or rather I I I'm fairly confident that it won't be a sustained move. But could you get oil up over 200 bucks on a spike? Very very easily because we're going to get in some ways the potential of an inversion of what happened in the spring of 2020.

[00:20:34]You might remember back then oil went negative and the reason it went negative was a quirk in the future contract where essentially right if you were holding the long contract on the day of expiry you had to receive uh delivery of that crude. Now we didn't have any room in the storage tanks and so the person who was holding that long tried desperately to find the other side of the contract and and get rid of it essentially. Um, and eventually they were able to, but at a very dear price where not only did they give the oil away for free, but they had to pay someone $47 uh in order to for the privilege of taking their oil, right? I think we could end up in a very similar but offsetting situation where if you're short oil um on NYX, let's say, you have to come up with the oil to deliver. And if you're starting to get worried about physical levels here, we're talking about physical levels. You could go into expiry and is it May? Is it June? I don't know. You could go into a physical expiry where you're like, get me out. I just need out of my short and you could see a massive squeeze higher. So, we're in that black swan tail area right now in my estimation where things are so badly muddled and mucked up that we could start to see some very, very, very strange uh things indeed. This time though unlike 2020 uh I think it will be um on the bullish side and unlike 2022 which really did sort of react to geopolitics and then settled down once those geopolitics settled. Uh I think what we're going to see here uh is a catalyst for people to begin looking at the space again and they're going to be sort of forced to realize that we're not rebuilding those inventories. They're going to stare at you every day. they're going to be awfully low. Uh there's going to be incremental bid in the market from the strategic reserves to refill those and it's going to be awfully difficult to get the commercial sector back to a comfortable level.

[00:22:36]>> Well, this could be the opposite of the old axiom which is um buy the rumor, sell the news. They've been selling the news uh by selling the rumor for oil, but they're going to have to buy the news, which is once the straight reopens, then we're going to settle down and we're going to go how much is actually missing? How long could this take? And that's when I think um yeah the the reality will sort of come in. So I want to turn now I got to talk about okay where's this oil going to come from? Trump I'm going to be very kind um could use some refinement in his understanding of oil because he came out and said that we're going to double our output next year in the US. So I want to sort of explore that for a bit and you do this in your report beautifully that there's okay there's OPEC and then there's not OPEC. Those those are the two big camps in here. And so it turns out that comparing the rest of not OPEC, nonopc to shale, it's been a shale story since 2009. I mean, there's basically no no change here. It's been a story of shale. So, okay, let's dial in on shale very quickly because it's that important. When we do, we find out that the rest of US shale since 2019 is basically down a million barrels a day.

[00:23:38]And more than 100% of our growth then is is due to shale from the Perian shale oil from the Perian making up that loss and then some.

[00:23:48]But then here's the killer. We see that the yearon-year growth expressed on a monthly basis that if you were back here in 2018 in that month there would have been around a million barrels more coming out of the ground than the similar month a year prior. And here's the co hole. But otherwise, this is a this this wedge says that the Perians grow its best days are behind it. Where is this oil growth going to come from that Trump's talking about?

[00:24:15]>> Well, look, I think that that's really the big question, isn't it? And um you know, we for a long time have argued that we feel that the shales are sort of past their sell by date. It doesn't mean they're going to collapse to zero, but it means that the days of a million million and a half barrels per day per year growth is clearly behind us. Um, and I don't think you will. And you know, I think you have to go back to 1971 where we found ourselves in a similar situation. The US conventional production had grown forever, absolutely forever. Uh and then in 1971 it unexpectedly rolled over and you had the first Arab oil crisis uh shortly thereafter. You know, so I mean talk about history rhyming. And Nixon got on and he said, "We're going to launch Project Independence and this will never happen again because we have this rich powerful bounty in this country and we're going to exploit it for our independence." Yeah. And so we did a few things including made it easier to permit for rigs for wells and um offered a few tax advantages. Although I think they in in general the tax advantages to the oil industry that everyone sort of talks about I don't really know what they're talking about.

[00:25:25]If you want tax advantages you should go into real estate not into oil and gas.

[00:25:28]You get some accelerated depreciation but that's about it. Um and and ironically the other thing you look to do is actually to lift some price caps on different uh energy sources because back then it was a question of availability not of price.

[00:25:41]Right? Today now we might go into the availability physicality side of it but in general everyone's worried about the price at the pump. No one's worried about gas lines. Uh so rising raising prices then was actually seen to help because uh you were going to incentivize the companies to drill and drill they did. They quadrupled their rig count.

[00:25:59]They really got after it in a in a very material way. Quadrupled. Think about that. You know, massive massive increase in mobilization of efforts and capital and production continued to fall by 30% by the time the decade was out. It wasn't because they weren't drilling wells, just the wells weren't as good as the ones they had drilled before. And so you lose the declines on this big big base of highly productive wells. And you start drilling to replace that with far less productive wells. and it becomes a treadmill that eventually throws you off and production rolls over under the its own weight. Uh, and I think that we're in that kind of uh potentially in that kind of a situation right now. So, you know, I will say that since we last spoke, uh, they've revised up some of the shale numbers, but really all that that has done uh is it sort of changed the whole that when you showed the year-on-year growth that was slowing over time, it kind of changed the whole chart. it didn't change the trajectory which continues to be very very fast slowing of year-on-year growth. So, the second derivative of production and um I think it means that if we haven't gone negative already, we'll be negative year within a month or two. So, I don't think that you're able to to do that uh to to to buck that trend. Um and I think that it's going to be very very difficult to find these incremental barrels. That's what makes this story so bullish is that I don't really know where it comes from.

[00:27:22]Well, it's interesting because, you know, the EIA in their short-term outlook in January, so they put this out monthly. I I I I scan it every time. And and here they were saying, um, this little black bar would be is, you know, we we're going to lose some production, but we're going to gain some production.

[00:27:37]The black bar is the sum of that. So, in 2024, we put on about I'll call that maybe 300,000 barrels a day. And then the next year it was, oh, they told me 300,000, then 400,000. But then we're going to be kind of flat for 2026. and are like, "Ah, you add it all up, we're going to be down 300,000 barrels by 2027." That was then after the war kicks out. This is from their April. And next thing you know, we're putting on, we're not down 300,000, we're up 400,000.

[00:28:05]That's a 700,000 barrel swing in just a couple of months. What could they be looking at?

[00:28:12]>> Hope.

[00:28:14]Look, I I I I I just don't see it. you know, um, when you look at sort of the headline numbers, it's very difficult to make projections on production, just looking at the summary statistics, it really pays to dig deeper, look at the wells, see how the wells are producing, try to project what they call type curves or production profiles for the wells, and then even then it's quite difficult uh to wrap it all up. And and so what you need to then do a little bit farther is study what is driving productivity. Has productivity changed either in barrels per foot of lateral or just barrels per well, however you want to look at it, and try to begin to understand, you know, what of those drivers could potentially be leading to um a change in production rate. And what I suspect um the EIA is is looking at for next year is a major uptick in drilling without appreciating that an uptick in drilling will have a nearly equal but offsetting decline in per well productivity. So very much like the 1970s you'll get the industry mobilized again. unfortunately, probably on the back of higher prices, not what the consumer wants to hear, not what the Fed wants to hear. That's the only way you're going to get the industry active again. And then it's going to risk disappointment because what you bring on is not going to be as productive as what you were drilling yesterday and not as productive as what you're drilling today. Both because we're just going to less productivity uh areas and then if you accelerate the development, then it can really fall off a cliff quite quite quickly. So I I see that as very very difficult to see how they arrest declines and like you said see a 700,000 barrel swing from their projection last month to this month. Uh I mean if you think about it right they had a model that suggested a decline. Now they see an incremental improvement of 700,000 from that number. That's the same as saying they're going to bring on 700,000 barrels more than they were expecting to last month. I don't know where you do that. 700,000 would be one of the best shale growth years ever. And that's just what they're saying need has changed incrementally from last month to this month for their projection. So I just simply put I don't see it. I just don't see it. I think instead um if you threw a lot at this maybe you get it back to flat. Well, and and as a side point, they didn't even uh model in that most recent report a big price increase for barrel of oil, but what difference would it really make? Because remember 2022, we had big price increases and uh didn't really meaningfully change the trajectory of this line. Um >> well, and that and that's and that's the what we call the the paradox of depletion because of course the oil industry is an economic industry. Of course, price matters. Uh but at the same time you see moments in time where production is challenged where the incremental barrel becomes harder to find and prices rally 10x you know and you could have said from 1999 to 2014 when price went from $11 to $100 and then stayed there for 5 years. You had economic incentives. The problem was the North Sea and Canterell, which were your big growth drivers through the 80s and 90s, were rolling over. In the 1970s, again, oil went up 14x and stayed there for a number of years. Uh, you had a huge economic incentive to get to work and get to work people did. US production fell um over that period of time. Why? Because the big growth driver, conventional, was slowing. So, you know, the paradox is that there's still resource left underground the day that the per day flow rate hits its maximum and rolls over. That's ultimately the paradox. You would think that with all that oil left in the ground, all that copper, mind you, if you're looking at copper mines, whatever it's going to be, you do not hit your maximum daily flow rate when that reserve exhausts itself. you hit the maximum daily flow rate with in some cases 50 or 60% of your resource still undeveloped yet. That's the paradox. And so people say, "Well, let's get after it faster." But you can't. Once you're past that level, it's very difficult to go on to make new highs. And so our contention is you're past that level in most of the shells. So absent finding a new field, uh I don't see that changing. Now, could you find a new shale field in the United States? I think that is highly highly unlikely and the reason is we've known where the shale fields have been for 50 or 60 years at this point. We lacked the technology to extract them. Which is why when that part of the puzzle clicked 15 or so years ago, we really got to work in a hurry and we developed, you know, 13 million barrels and 95 billion cubic feet per day of gas of shale resource because we knew where they all were. The the flip side to that, the other side of the coin, the darker side is that we don't have anything that's undiscovered in shale because we've mapped every inch of shell in the United States and we've developed it already.

[00:33:45]>> Well, indeed. And and um maybe you can shed some light on this uh as a closing piece on the oil story. So, I'm having trouble trying to assess how bad the damage is in the Gulf because the United States politely asked satellite photo companies not to take any photos and distribute them. And I haven't seen any.

[00:34:01]I don't know if you have access to anything. I really don't have a sense of how bad things are damaged over there and I won't know, but here's my rule of thumb. Uh, no news is bad news. So, they're hiding it from me because it's probably not good news is my beginning bid on that story. What What do you make of that? Look, you know, I I'm hearing stories of hedge funds that are sending their young analysts and dingies through the straight of Hormuz with big binoculars, and I suspect they're reporting back absolute nonsense, which then gets packaged quite nicely into their monthly investor reports and things of that nature. The the truth is we have no idea and we'll know when we know. Uh the the truth is also, frankly, that you know, damaged infrastructure gets repaired. Um, I in general prefer not to trade on geopolitical noise like that and and sometimes it's to my detriment because sometimes it takes quite a while to get repaired but in my mind those things are ultimately ultimately uh transitory and temporary unlike inflation um sometimes very disruptive sometimes for long times but I prefer to look at supply demand you know depletion problems geological issues and underlying currents of demand that that are a little easier to predict longer term uh than than things of that nature.

[00:35:17]But having said that, you know, it's all but guaranteed that when the street does reopen, like you said, it will take several months to bring it back up to its full production. And and the problem here is that we're on our back foot. You know, the inventories will be quite low and so we're going to need things in in a hurry. So, I think it's just going to uh make the level of acuteness more and potentially a little bit longer.

[00:35:39]Ultimately this bull market in crude whenever it has started we can debate whether it started yet or not. I think it most certainly has but uh ultimately the driver of this crude bull market is the fact that we've underinvested in it in the industry for so long. Uh we just don't have that next generation of projects ready to go once the shes start to decline and the sales are now slowing sharply and they might have already started to decline already and we we just don't have it. I mean it it's not waiting there that next big generation of offshore projects of oil sands projects what have you. Um we need to bring in you know we've been spending about 500 billion dollars per year as an industry upstream. Uh by my estimations we need to be spending about a trillion to a trillion and a half uh in order for for a number of years in order to write the ship. And you do that through economic incentives, meaning higher prices and good profitability and good stock performance. So this bull market is going to far outlast the repairs of the straight of hormuz of the infrastructure. These things are all catalysts. They're accelerants to this bull market. It's what is going to force people to pay attention. Uh and then I think we're in it for a number of years until we've recapitalized the industry.

[00:36:57]>> Everyone, we've been talking with Adam Rosenwag of Garing and Rosenwag. Go to go rozen g o r o zn.com to find their uh quarterly missives. I they are mustreads. 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?

[00:37:16]>> 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.

[00:38:08]>> Excellent. Well, Adam, thanks again.

[00:38:09]Really appreciate your time and and knowledge on all of this.

[00:38:12]>> Thank you.