Odd Lots

“Well, it was that in fact a nightmare scenario that had been in not only for energy, but for strategic planners for decades had happened. I think it's one of those things that people looked at as a scenario but thought it would never happen, but then it happened. And it does change the world and it changes the way people think about energy. We've had supply chain shocks, but this was the mother of all supply chain shocks in terms of the closure of the Strait Of Hormuz.”

“Iran's ability to control the Strait against a much stronger military is a demonstration that the balance of global power is changing, with profound ramifications for countries around the world. We discuss how different regions are being affected, and how it will change their calculus when it comes to energy security.”

“I think from the industry point of view, they saw there there are major dislocations, and those dislocations are playing out unevenly across the world. Asia hit the hardest, Europe feeling it, and then The US mainly seen it in terms of rising prices at the gasoline pump, but no problem getting supplies. But in Asia, a big problem getting supplies.”

“We had two different prices going at the same time. We had the the Brent, the futures price, which was always saying, well, this is gonna end and prices are gonna come down. And then there was the dated Brent, the near term, which said, we are having a major dislocation and prices are really going up. And we've never seen that dislocation on that scale before. It was like two different visions of the world almost.”

“We also talk about the AI industry's seemingly insatiable demand for electricity, and how this is rippling across the entire energy landscape. This is part of the long term trajectory of the energy layout which seems to have been altered, no matter what happens immediately with the conflict in Iran.”

“The acquisition of Beacon following the acquisition of Kodiak, which is followed now by the acquisition of TopBuild, takes us from eleven months ago where we had no building products revenue, let alone EBITDA, to the second largest publicly traded building products distributor in North America with more than $18,000,000,000 in combined company revenue and more than $2,000,000,000 of combined adjusted EBITDA. It's a big deal in the industry and a big deal in the market as a whole.”

“We will get a lot of business from data centers, but not just on the installation. Data centers need roofs too. Data centers need waterproofing, very much so. Data centers often need lumber related products. So so data centers are big consumers of building products. Now TopBuild itself has single digit percentage exposure to data centers, but it's very fast growing.”

“TopBuild is the largest installer and distributor of insulation. And as you were just saying, everybody needs insulation. Every house needs insulation in the walls. Every office building needs insulation everywhere. It's a needed product, and it's not going anywhere.”

“The old economy is still here. It's not generative AI, but it's arguably maybe it's even more important. You couldn't have the new economy without cooling and heating. The actual business of making things and moving things, heating and cooling, is very much enmeshed with the new economy, which is all about generative AI.”

“When we complete the merger, we'll be number one in insulation, we'll be the second biggest in roofing, will be number one in waterproofing, and will hold number one or number two positions in certain geographies within lumber and building materials. So we'll have a huge addressable market, several $100,000,000,000.”

“Conventional reservoirs have much higher porosity and permeability. They're actually much better reservoirs from a geologic standpoint. And so for the most part, you'll hear it in the industry parlance, those were the easy reservoirs to find. If you go back to like the 1920s, 1930s, drilling a field like the Yates field, which is kind of one of the most prolific oil fields, you were basically drilling a thousand feet into the ground vertically, and they were getting 400 to 500 to 1500 barrel a day IPs.”

“The horizontal shale game has largely become the domain of very large companies. I mean, you've got to have scale to be able to operate in that space. We're largely a production company. So the way to kind of think about it is, we buy assets that we think are undercapitalized, underappreciated, try to squeeze a little bit more juice out of each producing well and try to get cost down.”

“Now we're the largest oil and gas producer in the world. We produce more oil than any company in any country in the world. And so it's kind of gone unnoticed. And so I wanted to kind of get out and bring that up.”

“But if you look at the Baker Hughes oil and gas rig count, it's basically been trending sideways. In fact, the last available data, it fell by three. And then if you go out even further, it's been going sideways and slightly down since basically 2023. So we haven't seen a big supply side push, and that's despite a lot of noise coming out from the administration about unleashing US energy.”

“A lot of just, as I said, a lot of the assets that we're targeting are just too small. You know, they're rounding errors on the balance sheets of these large shale companies who are buying tens of thousands or hundreds of thousands of acres and drilling two to three miles under the ground. So it's just, we produce the same product. It's just a very different business.”

“I kind of feel maybe this is not just going to be like the steam engine or whatever. It might be very different. Maybe we won't have jobs, maybe there will be new jobs. Anyway, someone who's been talking and thinking a lot about this and why AI might be different, we're going to be speaking with the perfect guest.”

“In the jump from like where we were thinking about AI as these very very very targeted things like AI will play the game Go or something like that to something where WHOA, it can write an essay, it can tell me about this accounting property, it can make a four cast. All of a sudden, the generality of the technologies just exploded, and to me that was a huge deal.”

“When you like look at like some of like what was cutting edge in twenty nineteen, and then you look at what's cutting edge in late twenty twenty two, I'm almost more impressed than if like I hadn't known what they were up to in twenty nineteen. Like it's a huge gap with those few years.”

“I actually think that's kind of where we might be heading, where like the sort of social skills I've said before, the looksmaxing, the personal branding, the multitasking, I guess like becomes more important. So the future is performative humanity.”

“Even after a few months and like within the year, you saw that it was able to kind of do basic cognitive tasks to a decent degree. Like it wasn't like we are going to replace that person, but it was doing pretty sophisticated things that in the jump from thinking about AI as targeted things to something general exploded.”

“One of the through lines that I think we share between all thoughts and Planet Money is this idea that like, there are all these hidden economic forces that basically dictate the way we live totally. I mean there's been especially the you know, the less I mean, it's always the case, right, but especially in the last several years, which is just the sort of the invisible becoming divisible.”

“And so one of the early ideas we had was to think of this book as a field guide. You can imagine like leaving your house in the morning and tucking it under your arm to help you as you experience the economic forces outside your door.”

“Well, this one's easy for me because I did almost no work. Alex did all of the book work, and so that's what I would recommend in terms of division of labors, to not do the work. It's good advice, I think, so just have a friend who's a long time contributor.”

“Right, we all became supply chain experts during COVID, we became trade experts during twenty twenty five, and now we're all going to become commodity experts given the Iran situation as well. Without further ado, we do have the perfect guest.”

“So, speaking of formative life experiences and growing up in hidden economic forces, one of the things I learned from this book is that when I was performing as a California Raisin at the age of six, I was actually participating in a government like psyop. Basically explain that.”

“The seventies oil shocks, you know, seventy three was a function of the om Kumbor War Israel, the Arab nations reactions to that the second oil shock in nineteen seventy nine was a function of the Iranian revolution. Same geographic region, different in the sense that the US and Israel are the instigators, and different in the fact that so far, at least the magnitude of the shock is not at all comparable.”

“We’re kind of in this weird world where the physical interruption is bigger the price reaction is smaller. That could change if you look at it in terms of physical interruption of the flow of oils... it’s noted, yeah, we’re similar, maybe even worse.”

“One of the things that connected dollar dominance was this idea of well, the US Navy is what police the highest and made global trade flow and stuff like that. If that is under question of whether the US actually can keep ships going and the way they were, how does that change the equation?”

“And so yes, we've had this really big oil shock, and in addition, we might have some sort of shift in the global balance power, particularly if Aron is a tool keeper, it's a way with. What if it happens to be the case that to go from one place to another you need to pay in Chinese un instead of dollars.”

“If you're paying for oil in un does that mean that you're going to save that money in yon dollar reserve assets or are you just going to put it like right back into treasuries? There are a lot of questions that we have about this current moment. Obviously everything's still highly uncertain.”

“The war in Iran has caused the price of all kinds of commodities to surge, and that has a negative economic impact almost everywhere. But the squeeze is really being felt hard in East Asia, which is the ultimate destination for a lot of oil and gas that come out of the Gulf.”

“If you take a look at what's going on in the strait of war moves, it still seems to be shut more or less. You can see the number of ships that are going through that particular choke point, and I have two as of today, which is basically nothing compared to normal ship traffic.”

“The war will accelerate the region's appetite to restart nuclear power plants, ultimately lessening its dependence on imported natural gas. Though the acute pain may pass, this episode may already be reshaping the long-term energy trajectory of the region.”

“Per his channel checks, the region is already seeing a jump in demand for electric vehicles, with BYD dealers holding less and less inventory on hand. The extreme rationing and high prices are forcing a faster transition than previously anticipated.”

“Asia is very heavily exposed right now and more acutely thinking about what the impacts might be, how they might want to preempt them than the United States. Asia is a massive crude importer, and principally from the Middle East because it's the most proximate supply and generally has the cheapest shipping distances.”

“I think the thing that's confusing everyone is we keep seeing these headlines about like a billion barrels lost of world supply or twenty percent of the world's oil supply now choked out because of the Horror Moves situation. And yet if you look at the oil price, you know WTI Brent definitely up, but they're not up as much as you might think given the scale of disruption.”

“The challenge right now for Asia is that most of their crede supply does come from the Middle East, or there are some countries which do have some domestic production Malaysia, China of course, but broadly speaking, Asia is a massive crude import, and principally from the Middle East because it's the most proximate supply and generalize the chapest shipping distances and costs.”

“There was some there were some headlines about how maybe even in the good case, they would let through ten to fifteen, which is still sort of nothing compared to normal ship traffic, so like nothing's back to normal.”

“One thing about our current market moment is we are getting like a crash course in real time about the flow of energy throughout the world. And as we will see in this conversation, like it is still very much geographically constrained East versus West, and so as you say, the big question is whether or not the east kind of I don't know, scrambles even harder to adapt to this.”

“I forget which country was. They were, like, you know, they're doing that classic thing of only drive to work if your license plate ends in an odd number on this day. Whatever, very nineteen seventies. Yeah, and we're seeing a lot of these types of headlines, some in Korea, some Thailand, et cetera.”