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The Energy Poverty Returned on Energy Malinvestment

Leigh Goehring

Thursday, March 31, 2022

Dr. Chris Keefer  0:00  

Welcome back to Decouple. Today I'm joined by Leigh Guerin, a managing partner at Gehring and Rosen swag associates to discuss the fascinating natural resource market commentary that my good friend and friend of the podcast Richard Arlington put me onto, which was just authored at the end of February, I thought it was a really relevant piece that I wanted to share with this audience because it's really lifted the veils for me on what the underlying causes of the current energy crisis are. And that even obviously precludes the Russian invasion, as well. It's something that's been rattling around my head a little bit. The second part of the report really goes into an analysis of energy return on energy invested, which I think is a vital, vital framework for us to understand some of the flaws in thinking around our current energy transition models. So Lee, it's a great pleasure having you on the show. Thank you for making the time.


Leigh Goehring  0:52  

Oh, thank you very much for having me, Chris. And Leah, as you


Dr. Chris Keefer  0:55  

know, we like to do self introductions here. So if you can take a minute or two and help our audience get to know you a bit better.


Leigh Goehring  1:01  

Okay. My name is Lee Gehring. And I am one half of the of the the named person that runs the firm Gehring and Rosensweig associates, which is a firm that is dedicated to researching and investing in global commodity and natural resource markets. We are an SEC registered advisor, we manage the Gehring and Rosensweig resources Fund, which is which is a, which is a mutual fund that's open to all investors. And we also manage money for a number of institutional clients as well.


Dr. Chris Keefer  1:38  

And how about a little bit more about yourself? I think your dad was in the energy business I heard. And we had a previous conversation where you had some interesting anecdotes about some dinnertime conversations used to have as a kid.


Leigh Goehring  1:50  

Yeah, you know, it's interesting, as you'll know, as we go through this, this talk and interview today that, that I have a real interest in the world of commodities and natural resources. And it's just not something that started, you know, when I became an adult, both my parents used to work for Exxon. And what's interesting is Fun little fact is that, you know, there's an old refinery that's outside to the west of here in New York City, that the New Jersey Turnpike runs almost right through the middle of it called the Bayway refinery. And my parents met there back in the middle of World War Two and my father was a was a working in the refineries and is it an aviation fuel specialist. And that's how they met. So obviously, the the world of oil and gases is integral to my even be here today. But I, as I mentioned to Chris, the other day, we were talking is that, you know, the subject of oil and gas and commodities in general, always table cup top conversations when I was growing up. And this is a true story. My father actually used to lecture my brother and me back in the mid 1960s, his sons were burning a lot of hydrocarbons, we're putting a lot of co2 in the atmosphere. And someday that might be a problem. So the it's from the time I was a little kid, I've been exposed to this world. And I found I've found it absolutely fascinating. And I've been very, very lucky in my career, that to basically over the last 35 years to dedicate, you know, almost 100% of my working life to it,


Dr. Chris Keefer  3:21  

to thinking about these issues. Well, great. I mean, I'm really excited to dive right, right in, as I was saying an introduction, really excited to touch on energy crisis, the origins of it. And you know, what's happening right now, the second part of the report that was so interesting, was your analysis on cost reductions within renewable energy. And what the explainers were for that. And lastly, diving into this real kind of historical analysis of the energy return on energy invested framework as a way to understand human progress and potentially human regress in the future. So why don't we dive right in right on in and start with what's going on, you know, the your best explanation for the current energy crisis that we're facing at this moment?


Leigh Goehring  4:05  

Okay. And, you know, I just want to add one thing, Chris, is that one of the things that all our investments that we do here gearing and Rosenzweig is based upon incredibly in depth, and I like to think and I think many people will agree with it's very insightful research and regarding this energy crisis, which really took almost everyone by surprise people, you know, starting it didn't really become a headline topic in the financial pages of like the Wall Street Journal of Financial Times, until the fall of last year. However, you know, we wrote a big, big introductory essay in our second quarter 2020 letter entitled, The coming energy crisis, or I'm sorry, it was on on the verge of a digit crisis. So all the the issues that are are that are pushing energy prices higher today. He can almost everyone by surprise, but for us it Gary and roses wagon Reese garegin and Rosenzweig associates and our readership base that this shouldn't come as any surprise at all. Now, what's behind the the energy crisis that that that is gripping the world and I'm afraid is going to grip the world even harder in the next several years. It's it's popular opinion is coalesced around the idea that that it's a supply problem. And we've under invested in supply. And I will talk about that in a second. There's a lot of truth to that. But I think there's something that's even more interesting. This issue behind the the energy crisis that few people have, have really thought too hard about, you know, one of the things that we do here gearing and Rosenzweig, I talked about insightful research, you in commodities, we we spend a lot of time on supply, but we also try to do a lot of demand modeling of what commodity demand will be. And most people shut that aside because it's it's harder than supply, modeling in supplies, you talk to companies, you read consulting reports, you talk to a lot of people, you can say what are all the new projects, and you can come up with a pretty good idea what supply will be. But demand is much harder, because it's it's it's based upon a lot of, you know, factors that people don't really want to delve into. You say, Well, energy demand is 100 million barrels a day, what's it going to be in three years, and people just sort of shrug their shoulders and go with the consensus opinion. But you know, we we actually really delve down into the issues that they try to drive supply. And what are the and we've been, we've been banging the table?


Dr. Chris Keefer  6:37  

No, I had an interesting conversation with a kind of green friend of mine. And he was saying and 2020 when, you know, oil prices went negative, he said, you know, we were talking about peak oil in terms of supply in the early 2000s. But you know, his thesis was we were hitting peak demand. And, you know, with the explosion of electric battery, electric vehicles and other trend changes that that we were gonna see just demand melt away. And that, you know, that we were seeing, we're heading towards the end of oil. And I thought it seemed very naive at the time, I didn't have the kind of analytics that that I think that you're driving upon. But yeah, this is holding true for me echoing for me.


Leigh Goehring  7:10  

Yeah, Chris, this is so important because that you're exactly right. Most people believe consensus opinion, opinion, believe that 2019 was the peak in global oil demand, and that by 2030, we might be down five to 7 million barrels a day off the 2019 peak. We strongly disagreed with this. We've been pounding the table on this for the last decade, because this is a trend that's been in place a long time, in what it's being driven by this trend, this demand trend, which people don't really appreciate. And I should point out that even big consulting firms like the International Energy Agency, they have underestimated demand continually since 2010. This is hard to believe, but by almost 1 million barrels per day, per year, every year. And that demand estimation is coming from the way they're modeling demand in the emerging market world. Now one of the things about emerging market world oil demand energy demand, and it's slightly different for like electricity. And for natural gas, we'll talk about that, too. Is that is a country passes through this $2,000 per capita GDP level, we're basically your poor country, to the point where you become a higher middle income country, which would be $15,000 per capita GDP, it turns out that your oil consumption during that period of rapidly accelerates. And the reasons aren't hard to fathom. I mean, when you know when your $2,000 per capita GDP, and when rides around on bicycles, and then you go from bicycles to mopeds to motorcycles to Toyota's. And then when you actually pass through $15,000 of per capita GDP, there's people ride, a lot of people riding around in Mercedes and BMWs. And each one of those steps ups in transportation preference preferences, requires more and more energy. And, and so what's so interesting about that is that we've done all this research on this is that that that $2,000 $15,000 per capita GDP notch, where an oil consumption really accelerates. That notch contained between 1960 and in 2000, contained somewhere between 500 million to 750 million people per year on average. And then what happened in 2000? Is that primarily because of the introduction of China to that club, that it jumped from 750 million to basically well over two and a half billion. And since then, you've had you've had the additions of countries like the Philippines, Vietnam, Indonesia. Malaysia has been in it for a while. Thailand, and now you will. This is very, very important, which people don't understand. You're getting a introduction to a nuclear A member right today and that is India. And India is already is exhibiting and we written, I love it, you have traveled all over it, I think it's a fascinating place. And we believe that India has a very high probability to repeat a lot of the commodity acceleration that China experienced between 2002 into today, which is still going on today. And so India's Got 1.3 billion people just like China has. So you've got all these people in their period of rapid acceleration of oil demand. And it's now over 4 billion people never before have so many people been in this period. So if you think the 2019 is kind of the peak in global oil demand, you're living on the wrong planet. And in we're already seeing it, you know, the IEA, last year, in 2000 2021, demand estimate, which they had to revise in their January report, revised it up by almost 1 million barrels a day. It's the largest single revisions they've ever ever completed. And so the thing is, is that those are the underlying factors that are driving oil demand now, and my gut feel is that when we finally get through all the final revisions, we're going to find that 2022, oil demand is going to be close to two and a half to 3 million barrels above the 19th 2019 peak. And so you have very, very strong demand. And we've we've beta investments, investment, upstream investment choices in the oil business, based upon the 2019 was going to be the peak and it's not. And so we'd have we radically under invested relative that demand. And that's where we are today, we've got way too much demand, and we have not made enough investment in the supply upstream supply. And this has brought bring about a global energy crisis. And the


Dr. Chris Keefer  11:53  

investment cycle and energy is just that it's it's a cycle. In your report, you know, exploration, production spending, I think peaked in 2014, prices were still fairly high than 140 billion, they're down to 30 billion in 2020. So is it fair to say that it's mostly ESG pressures, that are suppressing that investment in traditional traditional fields? I mean, certainly there's been an explosion in spending in the renewables sector. But let's let's talk a little bit about the supply side now.


Leigh Goehring  12:24  

Yeah, though, supply side is very interesting, because there's a that is you brought up Chris, you're exactly right. You know, capex is still even with $100. Oil Price. Today, capex levels are, are below 50%, where they were back in 2014. What's behind that is far as the Super majors and we've we've written a couple really interesting essays about the the plight of the poor super major is that, yes, they are under tremendous ESG pressure to reduce their upstream traditional investment in in their businesses, that is an oil and gas exploration and production. And you see it were your Exxon Mobil, basically a shareholder group that owned point zero 2% of the stock that claimed to be green, which I don't understand, we can talk about that at all, I think that many of the, the things that they're proposing, or I would say are incredibly anti green. But the thing is, is that they own point zero 2% of the stock, and they were able to replace 25% of the directors, and set the company off on a green tangent, which will preclude them ultimately from investing in their upstream business, Royal Dutch Shell, first they're hit with first they're hit with a decision by a Dutch court that they are, you know, going to be extremely chastised, and I believe fined. Because they're not adhering to the Paris Climate Accords. If that's not bad enough, then what happens is they get attacked by an activist shareholder, who wants to break the company up and stop, you know, spin off the traditional upstream business and stop investing in it. And now you have companies like Chevron, which have have not been attacked directly, yet, they've only been indirectly attacked, you notice that they're going to spend, I believe it's $3 billion to buy somebody who collects vegetable oil and turns it into biofuels. Instead of investing in their upstream business. Now they're doing that because this is gonna is their, their, their prove that their potential hustle shareholder, their green hostile shareholders, they're doing green things, but the energy economics of doing that we'll talk about energy economics in a minute, are terrible. Your vet you might, you might be throwing that money away. And it's not going the upstream business. So yes, that is that is what one of the major reasons why we're not getting a big capital supply responses so far, because all those things I just described, those attackers, those forces on the Super majors, are preventing them from thinking clearly and pursuing their traditional upstream investment businesses. That The other


Dr. Chris Keefer  15:00  

day, but I guess we're gonna, I guess we're gonna see, like we've we've sort of been living through some easy times in the last 10 years. And you report you say that, you know, energy has not been this inexpensive for something like 150 years, capital hasn't been this expensive. I think you make the assertion in 4000 years. And it's been a time of a lot of climate concern. But it strikes me that climate concern and action is quite easy to do in a in a world where there's plentiful energy and cheap capital about and it's going to be really interesting to see the impacts that the energy crisis that soaring prices will have on on those kinds of climate decisions. And we're already seeing major, you know, investments, I think, starting, especially with the Russian aggression, now in Ukraine, in in traditional fossil fuels. We're seeing Biden, you know, begging Venezuela and Iran to up production. I think the rubber is really about to meet the road here in an interesting way, compared to these kind of this easy street of the last 10 years. Yep,


Leigh Goehring  15:59  

it I want to, before we go into, like, especially the renewables things, and because that's very, very important. But I want to make one, one further point on supply, which I think people are really missing. But it does tie in Chris, what you were saying with cheap capital over the last 10 years, from, say, 2010 to 2020, is that 90% Of all the growth in global oil supply has come from one source. And that's been the US shales. And the whole shale revolution here in the United States has been, it's classically American, you know, it was it was a bunch of people sitting around, saying, Oh, my God, we have all these hydrocarbons trapped in this rock that has zero permeability, zero, how in the world do we get it out? We know it's there. But we've never been able to figure it out. And so what did they do? They got it out the way the shale revolution started at Natural Gas back in the early 2000s. And then by 2010, it did really start to spread to the shale oils, you know, first in the Bakken, then the eagle furred and then the Permian, and then in the DJ basin as well. And so that shale revolution, basically produced 90% of all non OPEC and total global oil supply growth over the last 10 years. And, you know, we do a lot of modeling and the shells intense modeling using a neural network that tries to tell us where is shell productivity coming from? Can it continue in the future? What is behind shell productivity. And it turns out that, you know, basically what these companies have been doing and why shell growth has been so stupendous is they've gotten better and better and understanding shale plays, and they've concentrated their drilling into the top tier of aqueous positions that they have. And our modeling says that that top tier acreage position are on the verge except for the Permian, there's some left. But in the in the Bakken, and Eagle furred, especially, it's run out. And so we are never going to be able to grow the shells the way we did between 2010 2020, even if we throw huge amounts of new capital into it. And so the thing is, is that, that that's that source of supply growth, which has been the, the only source of supply growth, for all practical purposes, is coming to an end. So even if we search capital spending it we're not going to get the supply growth that we saw in the 2000s. And also in those shells back to Chris zero. Capital is yo those shell companies, while the private lot them backed by private equity, where their their cost of capital is very low. They went on these massively campaigns because of local low cost of capital. So you had an introduction to technology, combined with very low cost of capital. And it did tremendous things but that those tremendous things are over our modeling of the shale say, we could get some growth. But we're not going to get anywhere near the million and a half barrels per day growth that we got all the way through the last decade.


Dr. Chris Keefer  19:03  

I've been following the work of Doomberg quite a bit, the anonymous Green Chicken who's got such a great blog, a recent guest on the podcast, but they had a piece on drilled and uncompleted wells with this idea that we really have used up that that inventory. And in addition, I guess to what you're saying the best real estate's already been used, most productive shales have already been put in production. There's not a lot of, I guess, inertia to the system. There's not that we have to really restart the whole process in terms of starting a whole bunch of new drilling operations.


Leigh Goehring  19:33  

Yeah, that's Chris. That's exactly right. You know, we did get growth out of the shells last year by I think about by 800,000 barrels a day, you know, from the beginning of the year to the end of the year. But the thing is, that was all driven by like you said a duck liquidation. These were drill wells that have been drilled all the way back in 1999 2019 and 2000 had not been completed. Were just sitting there and they went back and completed them. Now you've you've finished the duck liquidation they've all been, they've all been basically completed. And so that we're gonna see a slowdown in shale growth. You know, the IEA, I believe has us shale growth of 800,000 barrels a day in 2000 2022. We don't think we don't think that we're going to get anywhere near that it's gonna be it's gonna disappoint.


Dr. Chris Keefer  20:25  

What do you think that kind of whiplash is going to look like here? You know, we're seeing supply getting very constrained, demand is surging. What kind of price territories we're heading into. You mentioned again, in the piece that energy prices have gone from being basically the lowest in human history with the negative pricing on oil to the highest ever, with natural gas trading at the equivalent of $300 a barrel. What's, what's your forecast, looking forward over the next year or two? You know, what's, what's the whiplash gonna look like, in terms of the prices required to get to get supply happening again,


Leigh Goehring  21:00  

the Whiplash is going to look is going to be pretty severe. And we were writing about this phenomenon is going to grip the global oil market and it's, I believe it's bleeding, beginning to grip the oil market state now it's being pulled forward by all the Russian problems. But what is going to happen this year, and like I said, this is before the Ukrainian invasion by Russia, is that we're going to wind up in a situation in global oil markets, it will be a situation that we've never ever been in, been in before. And that situation is that global oil demand by the fourth quarter of 2022, is going to approach total global oil pumping capability. Like I said, we have never ever been in this situation before. Even going back to the 1970s, the two oil crisis is back in 1973, the Arab oil embargo, and then in 1979, Iranian workers strike and dislocations that took place in 1979, we never are even close to global oil demand approaching total global oil pumping capability. In both those instances, we had somewhere between three and 5 million barrels of extra pumping capability, we are going to bump up against total public compute capability by the fourth quarter. And like I said, we don't know what that will look like. We've never ever been in that position before. But the thing is, it's going to make the the global oil market very, very susceptible to big price spikes, is priced by could read very well driven by a black swan event, you know, the hoodies are already lobbing missiles again into Saudi Arabia. Does the do the Iranians make another attempt to knock out, you know, 4 million barrels a day of Saudi oil capacity, which they did in 2019? If I remember, right, so the thing is, is that, you know, just based upon fundamentals, pre Russian fundamentals, were, you know, we're in a very strange situation, which people don't understand, for example, again, before Russia, in the first two months of 2022, we are still drawing inventories big time in global oil markets. Inventories should be building during this time period. And you could say, what are the reasons why, but I think it's because of strengthened demand and disappointments and supply. But the thing is, is that we're drawing down inventory. So when inventories are now getting to be dangerously low, before all the Russian problems, so given our demand modeling that's going to continue to get worse. So do we spike oil up to 200? It's, it's it's a realm of possibility.


Dr. Chris Keefer  23:41  

In terms of sort of the the current ESG investor thesis, I mean, some people are looking towards these high fossil fuel prices and saying, Hey, this is going to be a de facto carbon tax. This is actually going to be really good for the energy transition, you know, now's the time to, to build in a more more wind and solar and accelerate this transition. Or you know, as Peter buta kick says, you know, doesn't hurt me because I'm driving my my electric vehicle or people should be buying electric vehicles. Let's let's, I guess, move into into that thesis and explore a little bit. The historic spending that we've seen in the renewable sector in the wind and solar sector in the last few years, which you're calling a malinvestment on on par with the subprime mortgage crisis. I want to look into sort of the thought process of the the people that hold this this ESG thesis on investing in renewable energy, can you kind of give us your best summary of their argument?


Leigh Goehring  24:36  

Yeah. In stepping back again, Chris. Like I said, we pride ourselves here at Gary and Rosensweig associates of doing original research, and you're really trying to proverbially roll up our sleeves and dig into the the issues and trying to understand the issues and try to measure those issues and come up with investment conclusions that are based upon them. And what I think that what we're going to talk about now represents some of the war work at its best. Because, you know, so many people have asked us and we've done relative pockets. Why? Why did this? Why did this slip through everyone's notice? How did this, this these facts that you're putting forward, get missed by everyone else? And it's an interesting question, but I believe that your the more that we look at our research, the more that we're, we're convinced that we're correct. And what I'm talking about is that, you know, energy of renewable energies, and this existed both primarily wind and solar, we could talk extensively about EVs as well, is that they have, they have very, very poor energy efficiencies. And what is what is energy efficiency, it's er, O ei, it's a term that, you know, it's been made use by people like Vaclav Smil, and things like that, which I recommend everyone to read his book, energy and civilization, you know, it, I think that if you read that book, you'll really understand the things that we're talking about today. But the thing is, is that, oh, you know, if you have a energy source, that's very poor energy efficiency, it means that you have to put a lot of energy into it, to get very little energy out the other side. And so the thing is, is that, you know, what we're doing is we're, we're just placing energy sources that have er, O E, eyes of, basically, you know, 30, to one, that is you put in one unit of energy, and you get 30 units of energy out the other side, or in the case of nuclear, which is, you know, the, the prime source of energy efficiency, where you basically put one unit of energy and you get 100 units of energy out the other side, mind you all carbon free. And you're, you're just trying to displace those technologies, were with technologies, where your ER o vi, is basically anywhere between one to five to one to 10. And so, you could see that when you when you do that, you have to make this massive investment, massive investment, to get very, very little energy out the other side. And that's where the situation that we're in today, and I want to make one case here is that people have said, Oh, those are oh, your, your energy efficiency numbers for winter solar way off, you know, it's not five to 10 to one, but you know, we, the more we delve into it, the what we're doing is we're saying, okay, in 100%, renewable world 100%, you have to have enough redundancy of all your wind and sewers. And then you have to have massive, massive battery storage to do that. So when you come up with a one to five, that is you put in one unit of energy, and you only get five units out of the side, that is the fully loaded, fully loaded cost of renewables, which means you don't generate any electricity from backup coal or backup natural gas or nuclear, it's 100%. renewables, the world just covered with windmills and solar panels from one side to the other, and massive backup battery backup to so it could actually function as a baseload system. And that's one to five,


Dr. Chris Keefer  28:10  

which is a suit. Yeah, yeah. I mean, can you walk us through the historical context, because I thought that was one of my favorite parts of your piece, being a, I would call myself a history buff, but someone who's fascinated by it, and someone who's becoming rapidly an energy determinist, this whole energy return on energy invested framework really reminded me of, of essentially the petri dish, right? That, you know, from human prehistory, up until about 1650, when we were just doing the, you know, human power, animal muscle power, and biomass. Population wasn't spiking much, and there wasn't really a lot of innovation. And as we move through a series of leaps, in E, R, O D eyes, that's really when you saw, you know, population explode, but also human innovation explode, you saw us go from the Wright brothers to the moon, and, you know, 50 years, and it was just interesting, the way that you laid that out, it really, really made things make sense. And with this petri dish analysis, you know, you know, when you go from Yahweh, eyes of, you know, 30, to 100, to one back to a five to one, it makes the edges of that petri dish kind of come a lot closer and and the, the chances of hitting it much higher, and I guess the the, the impacts of hitting it that much more devastating. So yeah, let's just jump through a little historical analysis, or you break up the time periods quite well. But if you could walk us through that, I think that'd be really useful.


Leigh Goehring  29:27  

Okay. And what Chris is referring to is a podcast that we put out, Adam and I, which, if you were to go just on YouTube, and punch out Gary and Rosensweig, associate or go to our website, you can download it. And what we did is I thought it was very, very, very interesting. In our part, we tried to put this energy energy efficiency into a long term historical perspective. And we, the reason we did that is that we were trying to bring forth the concept that by reducing the energy efficiency of our overall economy in the with the primarily with the electricity and emotion that we that we produce, that there is going to be these massive unintended consequences that are associated with it. And we could talk about this a minute, but those unintended consequences are showing up in Europe as we speak, even before the Russian problems. And what what's so interesting is if you go back to two more than 2000 years ago, say one ad, and you look at the world, between one ad and 1650. AD, and why the reason why 1650 I'm going to pull that why that number is so important, is that was the, that was when we began to burn coal. And but between the 1650 years, between 180 and 1615, the world didn't change very much. Per capita GDP didn't grow at all, the population during that time period doubled. But you know, that's a compounded growth, that's almost nothing. And, you know, people were living in the 1650, exactly the same as they were living in the, you know, it wouldn't when Christ was born.


Dr. Chris Keefer  31:11  

That's when we lived in harmony with nature as Hans Rosling put it, we died in harmony with nature, and mostly children are not children under five and women in shelter.


Leigh Goehring  31:19  

Yeah, everyone, everyone lives in poverty, except for the aristocracy. And the, you know, the the aristocrats of the night, the ruling class, who basically stole all their wealth from everyone else, you didn't generate any wealth in the economy. So if you want to be Richard steal it, which is what they did.


Dr. Chris Keefer  31:36  

And when you when you say stole that wealth, it's really like the wealth is the energy surplus, and there wasn't much surplus generated


Leigh Goehring  31:43  

it, here's, here's the year, the year, the numbers during that time period, and they didn't change at all, is that between the food that you grow, the wood that you burned, and the labor that you are able to produce from animals and your own muscles, that basically all those you put one unit of energy in, you got 10 units of energy out. Now, the problem is, is that you needed to, you needed yourself, you need to consume four units of those energies for your own food you needed. You needed, like another three units of energy to feed your animals. And then you needed another, whatever that is, takes it up to 10 of the for, to basically keep yourself from freezing in the winter, you know, burning firewood, chopping it down, and things like that. And what happened is there was no excess energy left you, you produce 10 units of energy doing all those things, and you consume 10 units of energy, just to stay alive, not to advance just to stay alive. And so there was no growth. There was zero growth, zero economic growth for 1650 years. And then what happened in 1650. In Britain, you know, they chop down most of their wood for firewood and shipbuilding, and they had no firewood left, it said, what are we going to do? And they just said, Well, here's we got this stuff at burns, let's, let's dig it up and use it as fuel. And that was the beginning of the burning of coal. Now, the interesting thing about the burning of coal is it's incredibly more efficient than burning firewood. And so all of a sudden, you were placing this whole system where you put one unit of energy in, and you're getting 10 units of energy out of which you consumed all those energy units. At that all of a sudden, you begin burning coal, and you're putting one unit of energy in, and you're getting, say, 20 units of energy out. Now what happened is you still have to consume those 10 units of energy to survive, be dry animals, warm yourself and feed yourself. And but yeah, obviously, you had 10 units of surplus energy on the on the outside that didn't exist before. And so you were able to take that excess energy, and reinvest it in the economy and begin to grow. And so what happened between 1650 and 1900 world, the global economy grew by like four to five times, population grew four to five times, the world began to experience growth for the first time ever. And then what happened is we discovered oil and natural gas, you know, oil was discovered in 1858, by Colonel Drake, and simultaneous by the Rothschilds and in in Baku, and all of a sudden, we had another big surge surge in energy efficiency as we learned to burn those fossil fuels. And we went from basically, you know, one, to 20, to basically to an economy of one to 30. Well, that we have 20 units of surplus energy to reinvest the economy. And since in that produce the massive industrial revolution and the world that we live in today, like you said, Chris, we're sending people to the moon, we're flying we have the Wright Brothers, this is all happened because of the surplus energy that was associated with the burning of fossil fuels, hydrocarbons. And the problem is, is that okay, so if we're right, that going back to renewable world where where we're putting in one unit of energy in getting 30 units of energy out to a world we're putting one unit of energy in, and we're only getting 10 units of energy out. We're back to where we were back pre 1650. We can't grow, we cannot grow, we're all going to get poor. And now here's an interesting thing to ponder. There was a Bloomberg News article in about Germany, what the Germans are doing now. Now, this is like, this is like a Bayesian data fact that would say, would confirm what we're writing ready, but woodburning use in Germany is skyrocketing. People are beginning to burn their homes or heat their homes with wood. Well, that's what happens when you go back to an energy efficiency world where you put in one unit and get 10 units of energy, all of a sudden, wood becomes competitive. And mind you call become super competitive as well.


Dr. Chris Keefer  35:47  

Yeah, our Decouple studios host, Jesse Freeston just did a tour of the house of his hands, he also fell he's one of the architects of the feed in tariff, and a real champion of renewable energy in Germany. And during the cold the dunkel floaty, it's about three months of the year, where it's called, basically the doldrums, there's no wind and no sun, he runs his house on canola oil. So we may be heading into a bit of a food crunch as a result of high natural gas prices impacting fertilizer, and we got to decide whether to burn it to keep ourselves warm, or, you know, feed the world. So knowing that,


Leigh Goehring  36:24  

and that's the danger is that when you're, you know, if you've lowered the bar where you're competing against wind and solar, you can burn, burning canola oil, would under normal circumstances, would never make sense. Now make sense, because it's competitive. It's bizarre.


Dr. Chris Keefer  36:41  

We had an interesting podcast a few episodes back with John Constable of the Renewable Energy Foundation. And something he emphasized. And then I think feeds into your analysis. So well, is this idea that, you know, all of the civilizational infrastructure we have is the product of historical energy conversions, he gives the example of roads in England, that are still held up by bales of wool that people put down in marshes, right, or the the wood that was driven into the foundations of cities like Amsterdam, but more generally, all of the infrastructure around us, our hospitals, you know, our water systems, or sewers. That's all the product of that energy surplus that we had. And I think it's easy in the in the wealthy west, to take that infrastructure for granted. I mean, all I have to do is go places you've gone like in rural India, and you see what a disaster life can be without it. But you know, there's there's a real impact, and there's a lag to it in the developed world where we've been living with this energy surplus, where, you know, we have 3040 years until that infrastructure really starts to fall apart, I think we're kind of getting into that area and not making those investments. But I think that's another something that really gives me pause with, with these energy return energy investment numbers, you're giving me in this this analysis and framework you've you've offered up in the report.


Leigh Goehring  37:53  

Yeah, well, it's, you know, it's interesting, Chris, but you know, I would say the big dangerous, this can all happen much faster than then what people are thinking, and I think Europe is, is giving us a good, a good laboratory experiment on what this world would look like. I mean, Europe is Europe has spent in the last decade, it's estimated that a total of $1.5 trillion have gone into wind and solar and other related renewable infrastructure projects in Europe during that time period. And the cost that's associated with that is, is now now coming home to proverbially roost, as we speak it you know, I like to think about it in these terms, two terms, like for example, Germany generated somewhere between 25 to 30% of their electricity with nuclear power. Now, like I said, nuclear power is by far the most efficient energy source that you can ever get one unit of energy, and that is you, your mind the uranium, you, you, you upgrade it, you turn into a gas, you take that gas, you enrich it, you turn it into a pellet of rods, you build a massive pressurized water, electric electricity generating facility to convert it into electricity. And you it's one unit of energy to do all that you get 100 units of energy out the other side. And you and you've, you've shut that entire 30% 25 to 30% of your power generation down and replaced it with with renewables and and it will have that habit era ratio of one to 10 best at best. And so what's happened, you've you've have an energy crisis. And it you know, what are the interesting things is that is that we don't have the data yet, but we'll get it when the BP statistical survey comes out comes out for 2021 in June, we're gonna find out that European coal consumption in 2021 made an all time new high. And you know, the thing is, why did it make it all time new high? Well, because the internet The efficiency of your installed base now, which is so tilted towards, you know, solar and wind can't produce the power that you need. So what you have to you have to step back and start burning a hole again. So the thing is, it's just it's beginning to have massive effects as we speak, including, like I mentioned before Germans wrapped burning wood in their homes. Yeah, yeah. It is very,


Dr. Chris Keefer  40:24  

I learned recently in perhaps belatedly, that the origins of the European Union as a framework have their basis in the European Coal and Steel union. So maybe they're going to be returning back to that framework of alliances based on coal, hopefully not, I mean, there's this battle of the built the EU, sustainable finance taxonomy, which nuclear worked its way into, but, you know, it really does suggest your analysis that, you know, the move towards greater energy density and greater efficiency, you know, can allow that civilizational complexity to continue. And as we see, you know, the demographics tend to work themselves out, once you get to a certain level of energy consumption. And, you know, perhaps we can stay sort of within an ecological balance in terms of population, if we can generate that, that wealth with a source that doesn't produce carbon and has much lower environmental emissions. Anyway, I'm preaching to the converted in terms of my audience here. But I think on a more interesting front, the other bit of your report that I that I really wanted to chat with you about is your explanations for why, you know, renewables, quote, unquote, are getting so cheap. We've covered levelized cost of electricity recently with the wonderful Mark Nelson of the radian Energy Fund. But leaving aside LCMV calculations, and some of those distortions, let's just talk a little bit about, you know, why why costs have gone down. So, so much we've, you know, we've also chatted with Mark Mills about, you know, the misapplication of this concept of Moore's law. But I think your your explanations were great here. So why don't you dive in and give us your thesis on why renewable energy has been having these cost reductions?


Leigh Goehring  41:58  

Yeah, and this is very critical, because you're one of the great fallacies that's been adopted by most people, is that they say, What is the biggest deterrence to the adoption of renewables? And they'll say, oh, it's because it's compete. It's competing fuel, that is oil and gas and coal, are so low in price, so that when those prices rise, that all of a sudden, renewables, which are you know, proverbially out of the money, are they, from an economic standpoint, they don't make sense that they will go into the money, they will, they will be able to become economically competitive with with hydrocarbons. And that isn't true. And, and it also ties into what you're saying, Chris, before, what is, you know, we believe that, that there's this huge revolution taking place, in windmills and solar facilities, there's a Moore's Law taking place, then that's, that's the the driving factor that's driving down costs to make these things operate these things. And we would say no, that has nothing very little to do with it. It's just the fact that what is your by far the largest input into a wind or solar farm, its energy, which is representative, it's poor, er, O ei. And so the thing is, is if your energy costs and your capital cost go down, that explains something like 80 in our analysis, 80% of the reduction in the cost to build and operate both wind and solar farms. And that, so it's not been a Moore's law that's embedded in all the thing is just lower energy costs combined with very low capital cost. Now, what happens if energy costs and capital costs go up, that most of those gains that have been experienced over the last decade, are all wiped out. And, you know, again, solar and wind power cannot be pushed into the money relative to the hydrocarbons, they're not there, they're uncompetitive, this will, which is embedded in them will state they will stay uncompetitive, and they'll never be pushed into the mud. But this


Dr. Chris Keefer  44:03  

is something that's very interesting, because, you know, when we have whisperings of nuclear renaissance, or when nuclear ends up really getting built and succeeding, it's a times of historically high fossil fuel prices, right. I mean, the OPEC crisis, early 2000s, with fears about Peak Peak Oil in terms of supply. And now with the most recent energy crisis, there's a real pivot, a lot of countries are waking up reversing their nuclear phase out programs. You know, France, South Korea, the UK with its renewable, or with its regulated asset, best base changes. We really see that shift. And it's going to be interesting to see what what happens to renewable energy. You're I think, in the report, and I've heard elsewhere that, you know, polysilicon prices in China have gone up quite a bit because the price of coal was high, it was scarce, and they decided just to run their factories three days a week instead of, you know, every day of the week. Are you Are we seeing those kinds of patterns already emerging?


Leigh Goehring  44:56  

Oh, yes, it for example. It's like the poly silicon prices. The most evident, I should point out that polacek. polysilicon prices, I think are up close to 200% year over year. Now that was supposed to happen, they're supposed to continue to go down and down to down for Moore's laws, reasons or some, some reason that's not clear. Up same with battery, like, for example, the Evie revolution, which is is all, you know, supposed to take place because we're we're somehow going to be able to get our, our battery cost down so low that we're able to push EVs into the money on a competitive basis relative to internal combustion engines? Well, you know, the funny thing is, is that, you know, again, we've done the analysis that, that something like 80% 90% of all the cost in battery, battery reduction cost over the last decade is taking place because, versus we've gotten much more efficient, because we've used our battery making made them bigger and be able to fill them up. So we have operational efficiency, but we also have lower energy costs, your largest input to making batteries energy. And the thing is, is that those things have have been the driving force behind the reduction in battery costs. And so it turns out that like, for example, Bloomberg, green energy, who tracks all this, you know, they were a big believer that 2021 was gonna see another big reduction in battery costs fall into 2022, they've had to reverse themselves, it looks like battery costs now have hooked back up in 2021, we mean supplies, you see them get you go up in 2022. Again, we'll never be able, this ad will never be competitive with an internal combustion engine, because the biggest cost to it is energy. Ironically. So


Dr. Chris Keefer  46:40  

you know, there's, there's always some subtlety with the frameworks that we use, you know, the ROI, or looking at energy systems from the perspective of entropy as John Constable does, but in terms of Urei, one thing that I felt was missing was, well, and this is applying this kind of entropy analysis, right, we have low entropy fuel sources, like nuclear, coal, natural gas, and high entropy sources, like, you know, wind and solar, for instance, but the quality of the energy going into the renewables, the, you know, I don't know about my fingertips right now, but I think it's about three 400 tonnes of steel, you know, 20 tons of concrete into the the foundation of the the turbines, I mean, that's a lot of smell talks about windmills is almost temples to to fossil fuels, because of you know, the materials are made out of the huge earthmoving machines to install them, etc. But we put in, I guess, these low entropy, high quality fuels and energy sources, and we get out a very high entropy and low quality source of energy, namely, you know, electrons that are produced at the whims of the weather, often wildly out of out of cycle with actual demand on the grid. And, you know, that, of course, is bellied by the fact that you can't use a wind turbine to make another wind turbine. So this is this kind of what you're speaking to in terms of this, this historic misallocation of resources on par with the the subprime crisis? And do you think the results are going to be as as serious?


Leigh Goehring  48:06  

Yeah, it the other way look at it's just that, you know, what you're referring to with is energy density, I mean, the energy density of, you know, coal, oil and gas, and then the atom nuclear, there's so dense relative to the, the, the the density of the energy you're going to produce from wind and solar. And think of it like this, like you're a big, you're the largest scale, windmill today will be able to produce, in this lifetime, the equivalent of a belief of 1000 barrels of oil. And you look at it a well, that's drilled in the Permian Basin, that during its lifetime, it's going to produce 10,000 barrels of oil. So it a minimum, and, you know, you look at you look at a well, in the Permian, it's just this little tiny, you know, square where they've got this pumping jack on it, and things like that. And that's it. And yet, here's this massive windmill, that you're going to need them a minimum of 10 of those to equal the amount of energy that's coming out of this tiny well on the ground. And so the thing is, is that when you start thinking in those terms, then you have to put in so much energy, like you said, the steel for the windmills and things like that, and you bring the boundary back to where, like mining the copper out of the ground, and all that sort of thing. And the energy absorption and intensity do all that is huge, and people just don't appreciate it. And we've tried to actually measure it. And, you know, and that's where our, you know, the the numbers that we use come from,


Dr. Chris Keefer  49:43  

but again, there's this key difference because people throw that number around, well 1010, Windows 10 windmills over their lifetime will equal the same amount of energy as the natural gas but the natural gas is produced, it's stored. It's used when needed. It matches demand. You know where I live, we've made a large investment in Renewable Energy, particularly in wind, we have something called the lake effect, which means that, you know, our peak demand is during these horribly hot, humid, Great Lakes, summer heat waves when the wind doesn't move at all right. And so we ended up producing a lot of wind in the spring in the fall, when there's really no demand for it, we either curtail it or export it at rock bottom prices subsidizing our lovely neighbors to the south. But you know, what I mean, it's the energy invested was the high quality energy and energy produced at times as well, a lot of the time is completely useless.


Leigh Goehring  50:30  

Yeah, and that's, that's behind our Christmas behind our, our, our, what we call our fully loaded, or bring back the boundary of the era, EO EI of one to five is that, you know, when that when that wind isn't blowing when you need it, what do you do? Well, you've either got to build a windmill farm someplace else, to generate it, or another solar farm someplace else to generate. And then you have to have enough battery storage backup, so that it can be there when you need it. And when you incorporate all that, that's where you get this 12512 10 Your your number, which, as we pointed out before, as a society, we can't live on that, because we consume it all ourselves, there'll be no excess energy for growth whatsoever.


Dr. Chris Keefer  51:18  

So I'm not much of a writer, but I'm working on a piece called the renewable Emperor isn't wearing any clothes. And you know, for those of you familiar with the story, you know, a couple of kind of Kannada spinsters come to the Emperor's palace and say, you know, who's very fashion obsessed fashion forward, and they say, we're going to make you this incredible pair of clothes. And people that are kind of dumb and ignorant, they wouldn't be able to see them, they're going to be that beautiful. And they start weaving these clothes and, you know, the Emperor and his courtiers visits, and everyone's sort of taken in by them. And they keep asking for more gold, you know, because this is going to be such a great set of clothes. And of course, we know how the story goes, the Emperor ends up you know, their mind putting them on and he goes out for a walk. And a little child out in the in the crowd says, Daddy, the emperor is not wearing any clothes, and everyone starts to starts to laugh. I feel like what we're describing here in terms of using these very basic notions like entropy, like Yarrow, AI, the basic physics are so disqualifying of wind and solar as as energy transition solutions. And yet people are so taken in by by the spinsters be they the kind of academic and media intelligentsia and the political class that are wearing these clothes and just can't see that they're, they're naked? I mean, are you seeing this in the investment world as well? Is there is there a change? Are we at the moment where the child is speaking up here that that that common sense is coming coming through?


Leigh Goehring  52:42  

Here? You bring up a really good observation, Chris, by observations? No, not yet. Although I suspect that the energy crisis in Europe has really begun to open people's eyes to the, to the everything that we've talked about today, that possibly the direction of the path that we're walking down, today is not the right direction, it's not the way to go. And maybe, maybe this will be the thing that that will eventually convince people, because, say, for example, that everything we've talked about today, say it had the result that yes, we're gonna get a lot poorer, we're gonna have not any growth, we're gonna have to live, like back in Feudal times where the feudal lords took 50% of your grain harvest and said, If you don't like it, what are you going to do, which is basically what they do in Europe today, with between the VAT and the income tax. But the funny thing is that, if that solved the co2 problem, you'd say, well, that's just a cost we're gonna have to bear, we're just going to get a lot poor, which is what Michael Moore says, in his movie Planet of the humans, which I recommend everyone to watch. That he basically admits that he says, We're not going to solve our problem this way, we're just gonna have to get a lot poorer. And at least he admits it. And so the thing is, is that but if that actually reduced the co2, then you say, well, that's just the cost we're going to have to bear, but it's not going to reduce the co2 for a variety reasons. First, is we're going to desperately try to generate energy from other sources. We don't like to be poor. We don't like to live in 40 degree homes, the wintertime and things like that. So you're going to fall back on coal, which is what Europeans is burning right now. And wood. And so you got to do things like that. And this is before it. Remember, it takes so much energy to make this the renewables, that in itself, it's impossible to prevent from making co2. So you say, Okay, so we're not not only going to get poor, but we're not going to solve the co2 problem. However, there's another alternative, it's out there. And we've mentioned it before you've you've you've referenced it is nuclear power, is that not only is it incredibly energy efficiency, efficient, but it produces no co2. And so, for example, why, why in the night, this is this is interesting, because this shows you we're still going there. Wrong direction. Why did Mario Cuomo shut down? Indian Point you generated 2000 megawatts of power 100%, co2 free to supply over 25 to 30% of Southern New York State's power. It's completely that there is no rational reason there is no rational reason to do that. Why is California firstly shut down? Set on a fray in southern Southern California. And now Newsom is desperately trying to shut Diablo Canyon again 2000 megawatts of completely safe completely no co2 power. And mind you Do you know who the big person that's behind that shutting? It's a very famous investor that lives in Omaha, Nebraska, who is lobbying to sell coal based general electric generating capacity into California to replace the Diablo Canyon power? Again,


Dr. Chris Keefer  55:53  

can you name a name, please? I think that's important. I


Leigh Goehring  55:54  

can't name a name, but he lives the dome it lives in Nebraska. And the thing is, is that see, you could see which is it's not going to solve a problem, it's gonna make the problem worse. And so we're going down that path, and how long it takes for us to, to, to realize that we're doing it. Now Europe, the EU did a good thing with the taxonomy thing they did include nuclear power. And first, the the green, the green people were dead set against it did you can't do that. But they eventually they woke up and they allowed it to happen, which is a huge step forward. And like, for example, think of it this way, say you took that $1.5 trillion of investment in renewables in Europe done over the last 10 years. And you took that 1.5 trillion and build nothing but nuclear power plants. First, you'd have beautiful countryside, but don't windmills, scarring them, which annoys the people tremendously. Tremendous visual pollution. And second, you'd have so much power, you wouldn't know what to do with it. And there would be no pressure problem.


Dr. Chris Keefer  56:57  

I feel like it's it's very easy to be energy naive. Especially if you're living in times of historic cheap energy, and you have reliable grid and you flick a switch and the light comes on. It's a lot harder to be food naive. And I think food prices are going to hit people really, really hard. And it's going to be a rude awakening. But what's your forecast in terms of the impacts of the energy crisis, particularly the the vital role of natural gas as a feedstock for fertilizer? You know, I heard of number of UK fertilizer companies just had to shut down. And I think China and other countries are pursuing a sort of, we're gonna take care of our needs before satisfying the export market. What do you see coming in the next growing season or two?


Leigh Goehring  57:39  

Um, well, we'll step back a second. Again, like I said, we are gearing and Rosenzweig associates, we don't, we don't want to tell you what happened today or yesterday, or why we are we want to step we want to tell you what's going to happen in the future. And I should point out that we wrote a big essay, oh, probably, maybe a year and a half ago. It's called the coming agricultural crisis. And so we're again, it's this has taken everyone by surprise, but it hasn't taken us by surprise. And again, what's Why were we Why did we, when it didn't exist? Why did we talk about that? Well, again, it has to do with with the strength of global grain demand. And if you go from like 1960 to 2000, global grain demand grew by about 1.3% per year, which is very much in line with population growth. And then started in 2000, global grain demand went from a trendline of 1.3, basically, up to 2.3 to 2.5%, increase of almost 65 to 70%. A big shifting, tilting up of the of the demand for grain. Why did that happen? Same reason why we talked about before with oil, is that when people get richer, you begin when you're poor, you have a big starch based diet, you eat primarily rice and rice and bread. And then as you get rich, you decide to eat more animal protein and animal protein requires a lot of grain. Depending on how you measure it, one pound takes somewhere between, you know, three to five pounds of grain to do it. So it's it requires a lot of grain. And that's what's been going on. So the thing is, is that we've been able to meet that big, tilting up in global great demand with a string of unbelievably almost unprecedented good weather over the last 20 years. We've had just year after year of great global growing conditions interrupted, you know, the big floods the Midwest 96 year the drought in 2011. So but they've been one year events have been one off and it hasn't been disruptive. So global yields have marched steadily higher because of great growing seasons, combined with you know, us crop genetics and the application of more and more fertilizer every year. However, so we said this can't go on. There's gonna be some sort of black swan event that happens that we can't really predict that's going to append this whole thing. You know, we've drunk global drain inventories multiple times to dangerously low levels, we've been bailed out because of good weather. And someday this is going to end now looks like it ends. Now, the reason why the the, the, the high natural gas prices is so important is that, again, the making of fertilizers is incredibly energy intensive. I mean, nitrogen, which is one of the big three nutrients that has to be applied is basically taking natural gas or its equivalent and turning it into into a ammonia and, and then in solid state into urea. And that's that that's all basically taking energy and turning it into fertilizer. And so the thing is, if you if your energy prices skyrocket, multiple things happen, like for example, in China, which is the world's largest nitrogen producer, I mean, basically, I think they, they trician supply some China's supply something like 60 to 70% of the global seaborne urea market, which is a solid form of nitrogen. And they last fall when coal prices went skyrocketing, because China makes the urea out of coal, they they take the coal heated up, produce a sin gas and then and then reformulate that sin gas into a nitrogen based fertilizer, not even natural gas. It's incredibly energy efficient. And so the thing is, is that they curtailed nitrogen production, and they banned nitrogen exports because they needed themselves. Russia did the same thing. So and you've got the multiple multiple nitrogen fertilizer plants in Europe that have shut down because they can't afford to use natural gas prices, even as I speak or $35. In MCF, whether $5 here in the United States, you can't afford to make you can't get the nitrogen. You can't get the natural gas and you can't afford it. So we're starting to scrimp on nitrogen fertilizer production, big time, same with phosphate. And in potash remember, the Russians basically supply 40% of the world punish market. We don't know what's going to happen with that. So you've got this global fertilizer crisis. That's, that's come out of nowhere. Now, we've been bullish on fertilizers for completely different reasons. And, you know, we're big fertilizer investors, we've done that in the past multiple times. We were we were bullish on fertilizer prices, because we were bullish on grade prices.


And when grain prices go up, fertilizer prices go up, farmers buy more fertilizer all at the same time. Maximize the yields and they deplete inventories and prices go up. That was it was beginning to happen before all the energy crisis, the energy crisis just it's just throwing fire on that proverbial gasoline of the rule of bonfire. Why is it so important? Well, potash and, and phosphates are can reside in the soil for multiple years, they don't leach out right away. So you can actually reduce your application to petition potash and phosphate without too much yield. impact in the first couple of years, nitrogen is not that way at all nitrogen evaporates out in the soil, it has to be applied every year. And US farmers and Brazilian farmers, many of them apply twice a year. And so the thing is, is that if we begin reducing nitrogen applications on a global basis, there's a lot of evidence that's beginning to happen to talk about doing that Europe, we're going to have a big reduction a, a immediate reduction in the 2021, north north hemisphere grain harvest. So the thing is, is that it will be corn, wheat, and other grains not be soybeans, because it'll boost producer nitrogen. But the funny thing is, is that we're going to have, you know, we're gonna have a supply reduction. And you know, China had terrible weather last year. Maybe they have terrible weather this year. And then you throw on the Ukrainian problem. You know, remember growing up Roy's told the Ukraine was the world's breadbasket. Yeah, and now there's talk that they're not gonna be able to harvest the winter wheat harvest, which is you're starting to regrow right now. And they may not be getting a planting season in the summer, we don't know. So there's so many potential supply disruptions. So we are in a full blown, global agricultural crisis. And there's all sorts of things that can happen. And one of the things we have to worry about his food hoarding. And this is something we can talk about. You know, how this applies to the whole commodity complex. But, you know, remember, in times when prices begin to go up and inflationary psychology takes place, people begin to buy more inventory today, knowing that you either can't get it or to be higher price. We're beginning to see that in the global food markets right now. And so when people begin to hoard hoard agricultural product, there's evidence that's beginning to happen right now. We're going to supplies gonna be reduced. It's all gonna be tied up in inventory. And we can have another black swan event. What happens if China goes crazy and decides to enter global grain markets and starts buying everything that they can get?


Dr. Chris Keefer  1:04:54  

Well, that has over natural gas I guess they said, you know, at any cost we need to secure our supply


Leigh Goehring  1:05:00  

exactly needs to cry supplies. So we're in a full blown agricultural crisis, you'll our readers have been warned about it. And you know, we we've invested accordingly, based upon it, it's paying off. But it's something to really worry about because, you know, one of the things about high, high food prices, they cause social unrest. So that's, that's a, it's a disturbing trend that might be introduced as a issue in 2022.


Dr. Chris Keefer  1:05:28  

Oh, boy, oh, boy. Yeah, no, it's interesting. you've referenced about slabs mill, and I'd probably named drop them every other episode. But he talks about the most important technology of the 20th century. And he lists off, you know, a great number of them internal combustion engine, you know, the all the atomic technologies. And he really sits back on on the haber bosch process. And if 50% of his audience, you know, that, that that's the nitrogen in your body fit percent of the proteins in your body is because of that process. No, the


Leigh Goehring  1:05:58  

Green Revolution, the Green Revolution, which we're still living through, didn't really start to take place to the early 60s, you know, a lot of its fertilizer based. And we just don't We don't appreciate, you want to see a classic example of how quickly this can turn into a disaster. Look, if I recommend everyone to watch the internet and read all about Sri Lanka, that they, they, somebody convinced them that, you know, that, Oh, you should go back to the old days and go back to organic farming and doing nothing but application of organic fertilizers and things like that. And their crop yields collapsed, and the country's collapsed. There's a news article yesterday, they're rationing electricity to rationing fuel oil, it's a, it produces a lot of problem, we completely underestimate. You know, the how fertilizers have impacted our lives over the last 50 to 60 years. And it's unfortunately, incredibly energy intensive.


Dr. Chris Keefer  1:06:54  

Yeah, we've got a special election coming up with Saloni Shaw of the breakthrough Institute on Sri Lanka. So it will be deep diving that, I guess just in closing, I mean, when people are hungry, and cold, climate change really drops off as a concern. And I remain someone who's a real climate hawk. And that's what motivates my, you know, work in this space, particularly in advocacy for nuclear energy. You're forecasting some dark times ahead. And I'm just wanting to try and leave with a an iota of hope in my body. And I want to see sort of what what what are some sources of optimism for you, looking forward into the next few years? I know when when food and fuel are in crisis, that that leaves little room for optimism, but maybe in terms of the response, or, I mean, I'll give you give you a free range there to share some optimism.


Leigh Goehring  1:07:37  

Yeah, I think that, you know, many of the things that I've said, are unfortunate going to happen. Now, the question is, you as a person or as investor, what do you do? I would say, take appropriate measures to protect yourself on the investment side, and you can do it, you can, but you know, what, no one has done it. I mean, it's, you know, we talk to a huge number of, of big institutions and sovereign wealth funds, and, and endowments and wealthy family offices, and everyone hears what we say, and they shake their heads, yes. But they can't make the investment yet they can't come across the fence and say, you know, here's the money, you know, like, invested in things. I guarantee, like, for example, I say to people, I said, you said, let's sit around a table and sit around a table and come back in 2028. And what are we going to say? What did the past decade look like? What how would what adjectives would we terms, we would describe it? And I said, I would say, and there's a good interview with me, I could go on the subject, I said, will characterize this decade as the shortage of a decade of the shortage of everything. And the thing is, is that we're seeing that right now everything and and the thing is, everyone's gonna be poor, except for the people that made the investment decisions now, to not only protect themselves, but to profit by it. Like, for example, everyone should have physical gold and silver, big amounts of physical gold and silver, you should have your companies, investors in companies that are white, what I call asset heavy, like for example, Microsoft, all the fang stocks, those are asset light stocks. That's why they've done so well in a deflationary environment, if we go into an inflationary environment, and, you know, asset heavy companies, those with big heavy assets in the ground, oil companies, mining companies, they will agricultural companies, they, they will, they will be able to profit by everything I've talked about today. And we're beginning to see in the market now, you know, capital starting to flow into this area. So I say that, maybe you can't do anything about it, but you should take appropriate measures to protect yourself. Not only protect yourself, profit by it, you know, if you invested in things that I just said Back in the 1970s, you did much better than inflation, which, which was a huge problem back then. And so I think you could do that again. And yet no one's doing it. So that's would be my word advices is own physical gold and silver, own acid heavy companies, natural resource companies. And you know, you will by 2028 will sit around that that table and a lot of people will be poor and the people that are doing what I said will be rich, it at least will protect themselves.


Dr. Chris Keefer  1:10:34  

Alright for investment advice for the Decouple audience is much appreciated Leon your time and this stellar analysis, appreciate it. I'm, I'm late to find in your work. So tell us tell us tell listenership where we can find it and follow your predictions into the future. I'm just fascinated by the field of futurology. And you may not describe yourself as such, but it looks like you've made some very, very astute calls. Yeah, the real past


Leigh Goehring  1:11:01  

is, you know, we've been doing this a long time. And I've been writing that letter almost almost continuously, for our investors going all the way back to 1997. It's always had a huge following. And you when I started getting in Rosensweig, associates with Adam Rose, and like my partner back in January 1 2016. We said, let's put that public, let's put that letter into the public domain. Right. I didn't make it available everywhere. I


Dr. Chris Keefer  1:11:22  

was surprised it was publicly available. It's great.


Leigh Goehring  1:11:24  

Yeah. And so like, it's just like, it always has the past. It's gained a huge followship. And a lot of the research is there is good. And I should warn people, we don't always get it, right. We looking to the future is incredibly difficult. And we don't get it right all the time. But we were we were we do get a lot a lot, right. So all you have to do is go on our website. And you can download the letters, they're free to everyone. They're all in there, including all the way back to 2016. And if anyone's interested in investing, you can invest with us and there's information on how you do that on the website as well. So


Dr. Chris Keefer  1:12:05  

all right, we will leave it there. Thank you again. I look forward to having you and Adam back on the show at some point in the future.


Leigh Goehring  1:12:12  

Okay, very good. Chris. I I enjoyed this immensely. And I hope this is helpful and your your your your effort, and I'm glad to be a part of


Unknown Speaker  1:12:18  

it.



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