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Friday Sankey 12/4/20

What is the most dangerous part of a car? The nut holding the steering wheel. Who is this Pavlov guy? I cannot place him. But his name rings a bell. Using a cinnamon stick to stir your Christmas party drink is not a religious act. It’s egg nog stick. They call it the Labrador market – delighted with everything it bounds after. NASDAQ yay! Bitcoin yay! Copper yay! And thus, as we said in our […]

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8:50 AM

Morning Sankey 12/3/20

Save the Date for the 11th Annual Sankey Research refiners conference January 4th & 5th 2021. We have all six major independent US refiners line up for a series of fireside chats with yours truly: Marathon Petroleum, Valero, Phillips 66, HollyFrontier, Delek and PBF, with a couple more to be added. All at C-Level. Contact me for details. Last evening rumours broke that OPEC has reached a deal to gradually increase production in a tapered […]

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9:11 AM

Morning Darren

ExxonMobil’s press release last night entitled “ExxonMobil to prioritize capital investments on high-value assets” begs the cynic to ask “what exactly would you say you were doing before?” Well, here is the history answer and it is not pretty. But, this is all looking backward, we will look forward directly in this note with a strategy suggestion. And by “what were you doing before?” we mean this is a twenty-year question. Brief conclusions: the $20bn […]

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9:10 AM

Morning Game Theory

“We are not going to have an easy meeting. Some members oppose extending the previous production cut. And this makes it difficult.” – Iranian oil minister Zanganeh comments this morning as the meeting kicks off in Vienna. The OPEC meeting started virtually at 8am NY time. There is no more classic modern day example of Game Theory, and more specifically the Prisoner’s Dilemma, than an OPEC meeting. Cortez burned his conquistador boats in front of […]

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9:20 AM

Morning X-Ys Club

Last week we published a chart showing the x-y plot of trailing year-to-date free cashflow vs volume growth for the big oil group. This if you remember, prompted Silvio’s legendary joke when I called him to tell him I was having a nightmare with x-y charts, which he misheard to be “having a nightmare with ex-wife chat”. Anyway, a major Long Only investor replied immediately to the note last week pointing out that the chart […]

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8:47 AM

Morning Sankey 11/24/20

The oils continue to be lively driven by the surprising up-move in Brent & WTI crude prices, that has come at a point that looked by some measures to be max bearish. If you recall, over the last days of October, Brent fell from $43/bbl to $37/bbl and looked like it might have a run at $30/bbl, COVID resurging, Europe shutting down. Libya roaring back with 1mb/d incremental light-sweet supply. That bearish Atlantic Basin picture […]

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8:18 AM

Morning Friday 11/20/20

Breaking news: Germany is advising people to stock up on sausages and cheese. This is starting to look like the Wurst Käse scenario. I lost 200 pounds. That’s the last time I go to a British casino. Rudy Giuliani really risked his career on this. The dye is cast. Out of all the inventions in the past 100 years, which one was the most remarkable? The dry erase board. We had a refining CFO on […]

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8:38 AM

Morning Sankey 11/18/20

There are lots of interesting stories out there to consider, hoping to publish on Iran later this week, a sort of primer. Also in this note: UK Energy Policy, Bitcoin, Non-OPEC Guyana & Norway. As tweeted yesterday on my Sankey Research Twitter @crudegusher it only takes a 10% rotation OUT of Tesla into oils, to generate $36bn of buying pressure on this emasculated S&P Energy sector with a $694bn market cap. Energy (S&P ex utilities) […]

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9:02 AM

Morning Iran 11/17/20

Deciding what the rumour has priced into the market price, then watching the actual news hit, always tends to be a surprise, in that the market ripped yesterday on a second vaccine announcement from Moderna, even though it felt like vaccine news was all whispered all over the market just prior to the election, so prior to both announcements. As with these markets, you buy the rumour and buy the news, (you don’t fight the […]

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8:44 AM

Friday Sankey 11/13/20

Friday jokes: I lost all my sense of taste, I think I have COVID! Oh no wait, this is Bud Lite. My son said he was quitting college to move to the Arctic Circle. I said “I don’t like your latitude.” A kid goes to a Halloween party. The host asks him what he is dressed as, kid says “A harp.” The host rudely says “Your costume is too small to be a harp.” The […]

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8:24 AM

Morning Ex-Wife?

In a moment of desperation this morning I texted Silvio, my former associate, for a question on which he can always help. He called back as always but was on the bus heading through the Lincoln tunnel. I told him I was having a major problem; but the call broke up. He texted me “Sorry to hear you are having a nightmare your ex-wife… couldn’t hear the rest, call me whenever you want, hope you […]

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9:36 AM

Morning Sankey 11/11/20

Well for sure my timing in the Sunday Sankey making the uber-bear call for oil was completely destroyed one day after I made it, on Monday, by Pfizer’s announcement of a 90% effective COVID vaccine. My old joke is that I am never wrong, it’s just sometimes my timing can be WAY off. And the question of this note, given oil dynamics next move is positive, is timing of entry. Clearly the market was coiled […]

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8:16 AM

Election-free Sankey

*** This note is election commentary-free. We got definitive results last night. From Pioneer $PXD, Marathon Oil $MRO, Apache $APA, Energy Transfer $ET, and Delek $DK, boom, boom! Really notable sell-off on solar stocks which came into the past month flaming hot, and have seen major corrections led by Sunrun $RUN – 31% past month, SolarEdge -22% which compounded $RUN’s weakness with a guidance warning this week, and First Solar $FSLR down -15% this past […]

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8:17 AM

Waving or Drowning Sankey

With the first debate in late September followed by President Trump contracting COVID shortly after in early October, the market dynamic this year, in our view, has been 1) to rip off the March lows on Fed US$ printing, 2) then falter on election uncertainty and COVID resilience, then 3) resume ripping on more Fed printing, and then 4) finally, for October and Q4, increasingly price a “Blue Wave” as of October/Q4. Essentially the dynamic […]

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9:19 AM

Morning Sankey 11/3/20

Thoughts and sympathy for the victims of terrorism in historic and noble Vienna yesterday. A city close to the heart of anyone involved in global oil. We are many; terrorists are few. Rest in Peace. A momentous day, and I am not referring to the fact that November 3rd is National Sandwich Day. Yesterday on Twitter Arjun Murti, former Goldman Sachs legendary lead oil analyst, now Warburg Pincus adviser and ConocoPhillips board member, pointed out […]

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8:49 AM

Friday Saturday Sankey

Yesterday was tricky to publish a worthy note, until conference calls were complete. So this is the Friday Sankey on a Saturday. Happy Halloween! If life gives you melons you may be dyslexic What’s Sherlock Holmes’ favourite tree? A lemon tree Daddy, do all fairy tales start with “Once upon a time”? “No kid, there’s a whole series of fairly tales that start with “If elected, I promise…”” There were two key takeaways from ExxonMobil’s […]

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2:51 PM

Morning Iran

Iran – clients are asking, naturally worried that 1mb/d+ of oil exports will be added to glutted markets in the case of a Biden win. Comments on Foreign Policy under Biden below. Noted Enterprise posts good results. $EPD has been one of our few recommendations these past months. We have particularly highlighted the units to investors questioning ExxonMobil’s 10% yield, that $EPD offers a higher yield, with a more focused, secular-bull business model (see our […]

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9:26 AM

Morning CEOs

Today: how many CEOs per barrel? The calculation was triggered by BP results this morning, which underline our description that the oil market has settled at an equilibrium of “exquisite pain” – sustaining almost exactly $40/bbl since the beginning of Q3 (Brent broke $40/bbl for the first time post-COVID on 5th June and has hugged the price ever since). This is the planning assumption that we believe oils have to assume as their base case. […]

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9:10 AM

Morning Sanknews 10/22/20

News: France quashes a major US LNG export contract on US methane emissions/fracking. Quite where this leaves Russia and Algeria has not been specified by the French. Story broke on Politico Pro. In 2016 a French minister had highlighted that US LNG contained fracked gas, so to speak, and that France bans fracking. We all remember Hess and the Paris Basin, seen to be one of the great fracking opportunities in the world, it will […]

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9:17 AM

Morning Sankey 10/21/20

I am thinking on a long refining short airlines trade. Not least because all my clients are complaining that you cannot make money in the E&P tape. I have a few who say they have been the right side of all four major deals year to date; and barely made money. While you get a 10% pop “this is not why you owned them.” In fact the latest disappointment was definitely Pioneer-Parsley, with an investment […]

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8:39 AM

Pioneer-Parsley & History

Breaking news: WSJ October 18th 2020 Pioneer Natural Resources is in talks to buy Parsley Energy, according to people familiar with the matter, as a wave of consolidation takes hold in the beleaguered oil patch. Word from the oil field is the deal was due to be announced last week and got sidelined by COP-CXO. (Twitter). M&A stories in the WSJ are considered the most reliable of any business new source. Last week they were […]

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8:11 AM

“Happy” Hour & Friday

When Kasparov beat Carlsen I cheered so much I lost my voice. Now I am a hoarse chess nut. Kermit the Frog playing Hamlet got great reviews. It was a ribbeting performance. My friend wants to dress as an island off the coast of Italy for Halloween. I told him not to be Sicily. Happy Hour Comments and Why is Concho selling itself? We had a real live oil trader to start Happy Hour last […]

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9:10 AM

Conoco Poncho

$EOG was the name most speculated about as likely to MAKE a takeover in the wake of the Conoco-Concho story yesterday; the stock that reacted most was $XEC, perceived as the most likely next TAKE over company. Continental CLR is seen as needing to deal, $MRO too, $OVV potentially to offer a blizzard of stock, $FANG and Parsley $PE potentially to join the consolidation fray one way or the other; $CDEV is due to be […]

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9:22 AM

ConocoConcho

ConocoPhillips $COP for Concho $CXO does not generate the “why oh why” outrage of the seemingly ludicrous rumours at the time of Occidental for Anadarko, by any means. Last evening, just as we pondered a solidly in-line-with-expectations Q3 guidance from Diamondback $FANG, Bloomberg published a story claiming that ConocoPhillips is taking over Concho, which was a whole lot more exciting for a Tuesday evening, notwithstanding my wife Patricia getting liquidized chilli directly in her eye, […]

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9:23 AM

WEO Woah Woe Sankey

One of the cool things about experience in energy that goes back 30 years now, is that long term energy forecasts have come, and gone. Fifteen years ago, I obtained ExxonMobil’s 1980 energy outlook (to 2010), which was fascinating. It correctly predicted $100/bbl oil prices, but unfortunately missed the first move to $10/bbl (1986). CEO Lee Raymond swore never to use an oil price forecast again. At the IEA in the early 1990s, I worked […]

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8:47 AM

Morning Bullish Sankey

Very interesting Happy Hour yesterday… and an overwhelming sense of bullishness swept over me! How can this be when the oil market is still struggling so badly? Well… a couple of things. But first, it’s Friday, and this is the Friday Sankey, so its JOKE TIME. What’s the biggest lie in American politics in 2020? You have 2 minutes uninterrupted.Please respond to your opponent’s total ignoring of the question. You have two minutes.A fly on […]

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8:27 AM

Mega-Theme: Standard Oil vs Big Tech

Client email: Paul, a question to you as a student of history. My recollection is that Rockefeller got even richer when US government broke up his monopoly? Copying my tech colleague who may be pondering what happens if US government attempts to break up their monopolies… Sankey: From recollection the quick answer is yes, the sum of the parts was greater than the whole. I’ll check now but it certainly happened at a time of […]

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8:48 AM

Tesla vs ExxonMobil Porcupine Battle I

Looking at the future of US gasoline demand, I got sucked into the history of Tesla’s SEC filings essentially with a view to replicating my notorious chart of ExxonMobil’s volumes since 2000, vs their annual analyst meeting target for volumes. The dreaded porcupine chart, which has no more inappropriate quill than the last, which was repeated at the March 2020 analyst meeting at peak COVID in NYC. ExxonMobil’s volumes vs their analyst meeting targets As […]

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10:25 AM

Friday Air Sankey

Well indeed, there are a lot of jokes out there this morning… you can say the news has gone viral. However, given our self-imposed standards of taste and decency, we will limit the news jokes to non-Presidential. If you’re driving a stolen Tesla… Would it be called an Edison? Mark Zuckerberg is in a car accident. Guy : “Let’s exchange personal details” Mark : “You are Scott Thomas, you have 237 friends out of which […]

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10:23 AM

EU sure about that?

With so many long term forecasts being thrown around over the past month on energy demand and emissions, this analyst has been deeply cynical after 30 years of following long term energy modelling. The worst long term forecasts are already wrong when they are made. That is close to being the case currently as companies use a 2018 or 2019 base year, skipping the little matter of 2020, which has seen, for example, an enormous […]

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8:29 AM

Propane Sankey

Yet another bull point on propane. The Morning Sankey goes down the rabbit hole. New York City has made outdoor dining permanent, and the City has lifted the post-911 ban on propane canisters in Manhattan (welders were excepted). With indoor dining limited to 25% capacity, operating restaurants are dependent on outdoor dining, and there has been a scramble to buy propane heaters. My neighbour manages three restaurants and said he was about to buy 15 […]

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10:02 AM

Morning Renaissance

Good news for the industry. Rationalisation. Where does it leave Cimarex and Marathon? We first outlined our “Renaissance of US E&P” thesis in 2017, arguing that the problem with US oil stocks was not the industrial opportunity, led by the greatest oil field in the world – the Permian, securely located in Texas adjacent to the world’s largest refining center. The problem at the time it was not the oil price, which was $50/bbl and […]

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8:41 AM

Friday Sankey 9/25/20

What do the Russians say when their internet is down?Internyet A kid finds a magical lamp. He rubs the lamp, and a genie appears and says, “What is your first wish?” The kid says, “I wish I were rich!”The genie replies, “It is done! What is your second wish, Rich?” The bartender asks why the nonlinear storytelling? Quentin Tarantino walks into a bar. Friday in September, a great time of year in the US. Your […]

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9:00 AM

Mid-Morning Sankey

Tonight, Happy Hour Zoom, contact me for details. It’s 5pm and always fun and interesting, always frankly to my surprise. All welcome to a maximum of eight. In due course this 5pm meeting will feature corporate access guests. Tomorrow 5:20am CNBC with Brian Sullivan. Brian was interested in yesterday’s Morning Sankey which made the Renaissance argument for “orderly liquidation” of major oils. So this week the Dallas Fed published a survey that had me just […]

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10:23 AM

Morning Titanic Sankey

Three analyst meetings in two weeks: BP, Apple, Tesla. Confirmed by Tesla Battery Day: the Big Oils need to pursue a strategy of “orderly liquidation” in line with our “Renaissance of US E&P” thesis. Cut capex, reduce growth, return cash to shareholders. Orderly liquidation. Shrink to grow value. We are advising a refiner to go private, we have been for years, arguably we have been for all refiners. No growth capex, buy back stock until […]

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9:17 AM

Morning Mini Sankey 9/22/20

Today, on Tesla battery day, a quick look at electric car economics. Why are so few electric cars sold? Because they are more expensive. Why when the fuel economics are so over-powering, are so few taxis electric? Because electric cars take too long to fill for taxi drivers. Why does this matter? Because the single largest part of the world oil market is US gasoline. As shown below, the red balloon is North American gasoline, […]

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9:15 AM

Morning Sankey 9/21/20

The market looks weak this morning, and the news that Nikola founder and CEO Trevor Milton is stepping down is a notable moment in the history of hydrogen in heavy truck transport, and corporate fraud. We assume his completely unqualified brother will no longer be “Director of Hydrogen Production/Infrastructure” at Nikola. What a joke. Kudos to Hindenburg Research. Further to yelling on my part about how bad New York COVID policy is, note that a […]

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8:07 AM

Let me fly!

The future of global energy, key focus points: Battlegrounds: EU, US, China, India. Reminder: nearly 60% of Chinese and Indian energy still comes from coal. Or, as a refining CEO tells us “China has more coal-fired power plants under construction, than the US has coal-fired power plants”. Noted, US is still 12% coal-fired, vs 9% renewable (total energy balance). In this note, jet fuel demand. Jet is the key to the future of global oil. […]

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9:04 AM

Morning Sankey Wainscott

The US government Bureau of Ocean Energy Management (BOEM) has projected that some 2,000 offshore wind turbines will generate 22GW of power by 2030 for the US. Its hardly surprising that BP has bought into this spectacular growth, which fits right into their low carbon shift in the 2030 timeframe. Reminder, in a September 10th press release, BP announced it would pay $1.1bn for a 50% stake in Equinor’s 2 GW Empire Wind, located off […]

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8:25 AM

Morning Sankey 9/14/20

Start your engines, or rather, share your computers as part of our future, for the longest analyst meeting in history starting this morning at 8:30am Eastern Time, as BP commences “BP Week.” We have five hours today, followed by three hours each on Tuesday and Wednesday. To kick things off, BP has released its World Energy Outlook. One of these outcomes fits our world view for energy to 2050. Can you guess which one it […]

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7:54 AM

Morning Saudi US$ Sankey

There is a glaring omission from McKinsey’s Vision 2030 for Saudi Arabia. It does not mention the Saudi Riyal – Dollar peg, other than in a footnote to indicate that the modelling in the outlook assumes the long-standing $3.75 peg is maintained. We are just wondering if a Biden Presidency would engage Iran, and if Saudi retaliation could take the form of dropping the Riyal-Dollar peg. Our understanding is that while the Saudi Arabian Monetary […]

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9:14 AM

Afternoon Sankey

There is a conspiracy theory, totally unsubstantiated, that Nikola Tesla was in New York the day the Hindenburg airship crashed in 1937, and that had been asked to use an ion gun to bring down the airship and preserve the US helium monopoly, while denigrating flammable hydrogen, that the Hindenburg was forced to use, owing to the US monopoly. This of course is a wild, somewhat meaningless and certainly unsubstantiated conspiracy theory, but it fits […]

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2:19 PM

Synthetic XOM

A client pointed out that DOW stock has been on a bit of a tear recently, while XOM cannot catch a bid. This is a reasonable point, and the same could be said of Phillips 66 PSX, which has also been languishing, despite its chemicals exposure. That stock shrugged off a bad 2019 for chemicals margins, which then got truly abysmal with COVID. Subsequently controversy/risk around the Dakota Access Pipeline has ailed PSX, with the […]

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6:39 PM

Morning Sankey 9/4/20

This year has had no rhythm. The traditional summer Memorial Day to Labor Day closes, but nobody is returning to the office in Manhattan. We think of the day after Labor Day – this coming Tuesday – as the start of the Wall Street sellside year; the Lehman Oil & Gas Conference in sweltering Manhattan, that starting company roadshows, Q3 results, going on the road marketing, the backdrop of Halloween, Thanksgiving, Christmas, the slog from […]

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7:07 AM

Morning Sankey 8/28/20

A photographer was killed in a freak accident today. When trying to take a group photo, a giant wheel of cheddar rolled down behind him and crushed him. Witnesses said people did try to warn him. Sherlock Holmes was reading when Watson came in looking confused. “I say Holmes! Why have you painted our front door bright yellow?” “Lemon entry, my dear Watson,” “Knock knock” ‘Get a warrant’ A couple of thoughts to end the […]

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9:14 AM

Where is oil as Laura hits? Morning Sankey 8/27/20

Corporate newsflow remains quiet, with the market awaiting more details on the historic announcement from BP on its climate change plans, due September 14th-16th. Several major US oil investors consider this BP move a 100-year strategy shift for big oil. Notably the stunning -40% oil and gas production reduction, as a strategy pillar. US investors remain cynical, the most negative seeing the announcement as a smokescreen for the dividend cut. Elsewhere re-injection issues for ExxonMobil/Hess […]

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8:35 AM

And now, the weather. Morning Sankey 8/26/20

In this note we round up hurricanes, floods, wildfires, and the starting formation of the polar vortex. Stay safe out there! Dailybeast.com The National Hurricane Center warned early Wednesday that Laura has become “a formidable hurricane” with a storm surge that could push 30 miles inland and added: “There are no signs it will stop soon.” Laura has already killed at least 23 people in the Dominican Republic and Haiti, USA Today reports. Hundreds of […]

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8:22 AM

Oil Guns and God Morning Sankey 8/25/20

My head is spinning this morning from reading the transcript of Donald Trump’s speech last night to the Republican National Convention. It didn’t take too long to realise he was speaking off-the-cuff, there was an opening that went straight to mail-in ballots, and the stream of consciousness continued from there. He looked very tanned and relaxed, a bit hoarse to start. And was referring to notes. But the content was pure stream-of-Donald-consciousness. But first, the […]

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8:48 AM

The new peak oil: Government as God

Two highlights from the Sunday Sankey today. 1) The concept of EU carbon trading as “super-charged OPEC” has been raised in the FT over the weekend, and we highlighted the article in yesterday’s Sunday Sankey. The FT article provocatively titles the EU CO2 market as a “one-way bet for hedge funds” which is sure clickbait. The article almost inadvertently highlights the crazy world of energy we are about to enter, which is “the new peak […]

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8:55 AM

ESG Monster Problems: Gorgon and Three Gorges

This will be the first year our family doesn’t vacation in Hawaii because of COVID. Normally it is because we can’t afford it. What is Britain’s biggest export? Independence days. I was overtaken by a car being driven by a sheep in a swimsuit. I think it was a lamb bikini. We’ve had some impact research this week, based on feedback, but there is an altruistic side to everything we do, and, much as you […]

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9:39 AM
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