Odd Lots - War in Iran Is Redrawing the Map for Natural Gas

Episode Date: March 18, 2026

Mostly, the world has been watching the price of oil skyrocket amid the war in Iran and the de facto closure of the Strait of Hormuz. But there's more than just oil that comes out of the region. Qatar is home to the world's largest natural gas field, and for now, it's been almost completely cut off from the rest of the world. Not only has Gulf gas supply been cut off, there's also damage to the core infrastructure, which will take time to repair. Meanwhile, the US is rapidly becoming a natural gas export powerhouse, with volumes having surged since Russia's invasion of Ukraine. So, all in all, the world's natural gas map is rapidly being redrawn. On this episode, we turn to the one and only Bob Brackett, managing director and senior research analyst at Bernstein & Co. He explains the impact of the war on global prices, the prospect for further US exports, how the world will adjust to the loss of Gulf supply, as well as the other commodities that are getting squeezed right now.Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

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I'm Joe Wisenthal. And I'm Tracy Allo. So Tracy, you know, the war in Iran is primarily, at least from a commodity standpoint, being understood as like an oil shock. That's the number that most people are paying attention to. That is the headline, sure. But as we know, for multiple episodes we've already done, it's not just an oil region.

And of course, we've been talking about fertilizer in one of our episodes. We did the episode on other sort of dry-balt commodity shipping that's affected by the closure or the only, almost closure of the Strait of Hormuz. There's plenty there. It's not just an oil story. Yeah, the one silver lining of all of this, I guess, is that we're all becoming commodities, experts, supply chain commodities experts and petrochemicals as well.

I should just say we're recording this on March 17th, because who knows what's going to happen by the time this episode comes out. But one of the big headlines today is that Iran has just struck one of the big gas fields in the UAE. Yes. Which is the Shaw field in the sort of. empty corridor area and it's on fire. So pretty dramatic footage, which definitely does tend to concentrate your mind on one particular commodity, which is gas. Well, there's sort of like two

dimensions of the supply chain disruption, isn't there? Because there is the fact that for the most part, there are very few vessels going through the straight of Hormuz. And people are sort of wondering, when will that open again, right? But then there's the other question of, as you just mentioned, there's a lot of damage to core infrastructure of various sorts. And so setting aside when the strait opens, how badly will the production infrastructure be impaired and how long will that go on? That's a sort of separate dimension besides just the passing of the ships. Right.

And I think Natgas in particular had these sort of geopolitical connotations even before the war with Iran. We're all used to thinking about, you know, big strategic pipelines and thinking about potential disruptions to those back when Russia invaded Ukraine. there was obviously a European gas crisis. And so everyone's kind of worried about Europe once again. Yes. There's a lot to discuss.

Totally. I saw a headline today also on the train here, talking about how like Pakistan is very serious. It's like they have like a month of NAD gas right now and they're heavily dependent on gas from the region. Of course, the fertilizer story as we learned urea downstream from NAD gas, etc. Anyway, last year we did our live episode with one of our favorite. favorite commodities guest, Bob Brackett. And I recall, as we were walking out of the theater, I was like, Bob, we got to have you back on just for like an episode. Let's pick a commodity.

And he said, next time I'm on, let's talk about node gas. Yeah. I was like, all right. And so. So it turns out that now is the perfect time for the perfect guest. The perfect time for the perfect guest. We are going to be speaking with Bob Brackett, managing director and senior research analysts covering North American oil and gas exploration and production and global metals and mining at Bernstein Research. So, Bob, thank you so much for coming back on Adla.

Thanks for having me, Joe. Thanks for having me, Tracy. When I said we should do an episode on one commodity, at that time, why do your mind immediately go to net gas? Was that the big story in your mind? So one, and I've told clients this, I am most useful when I am least loved. And the problem with being a cyclical commodity analyst is everyone will ask me about whatever is the highest on the screen.

Yeah. That's the thing that's going to be to revert lower. The money has already been made there. Okay. And therefore, you should be looking at the things that no one's really talking about. So I would argue, you know, today,

Henry Hubb, U.S. natural gas, not the LNG stuff that's shut in, not other commodities. Henry Hub is unloved. Okay. Sitting at $3 an MCF while we have all of these underlying demand drivers in the U.S. So it's the forgotten molecule today.

The forgotten molecule. I like that. But just broadly, though, you were pretty spot on when it came to Nat Gas, because I remember last year you turned bullish after like 15 years of being bearish, something like that. So I know you're too modest to say that you got that call correct, but directionally, things seem to be going your way. Yeah, so I've been Bernstein covering the energy space, yeah, nylon 15, 16 years. And for most of that time, we've had these giant disruptions. First, we had shale gas, where the entire oil and gas complex was drilling and learning curves of how do you frack gas, how do you get it out. We drove the cost of shale gas down

up 350, an MCF. And then shale oil comes along the way and just hands out, you know, gives away the associated gas from oil directed drilling. And so you've had a big chunk of the cost curve that doesn't really care what the price of gas is. It's a byproduct. Waha gas price go negative at time to time, it doesn't slow down the oil drilling. And then finally, you're starting to see the light where in the same way that the shale oil industry became well-behaved, kind of in 2018, the shale gas industry, and especially the Hainesville shale, sitting down there on the border of Louisiana, and Texas starts to behave itself. And in a world where you have these really strong, structural demand drivers to the upside, and you have discipline on the supply side, that's a nice time to come into a sector.

Amazing. Perfect setup. One more sort of setup question. I was sort of thinking about this on the way in. Like when I think about oil, you know, there's various grades of oil and there's various prices. But basically there's one global price of oil. And everything trades in a little bit of a spread to that, depending a little bit on geography and depending a little bit on grade and light sweet and heavy sour, whatever it is. My impression and tell me if I'm wrong is that with gas, the story is like there's one type of gas. gas, but there is absolutely not one global market because the exact flip side of oil, the supply chain is just so radically fractured. Yeah, if you think about it, a VLCC, very large crude carrier, holds two million barrels of oil. And oil, today's $100 a barrel. I couldn't have said that three, four weeks ago. And the movement, the cost of moving that halfway across the world, a few bucks a barrel. So for a couple percent, I can take my product to deliver to you,

you want. Anywhere. You go to LNG. The cost of getting shale gas out of the Marcellus from two miles down and two miles out through the fractures is less than a dollar. Then it's a couple bucks to get it to market, Henry Hub, through pipelines. If I want to ship it, it costs me two and a half bucks to liquefy it, another buck and a half to put it on a vessel, send it somewhere, and then regas it.

And so 80, 90 percent of the cost of gas is in the movement. Wow. And so in that world, all right, you've got a law of one price for oil, right? Because the relative value of the cargo versus the shipping's trivial. With gas, it's all the game of distance and markets, and therefore there is no one price. So can you maybe just situate us on Iran's place in the sort of, I guess, gas complex of the world? Because, you know, we think about it as a commodities player, but a sort of unreliable commodities player in some respects. You never know what's going to get sanctioned.

and gnat gas, as we all know, tends to be kind of volatile in and of itself. So what exactly is Iran's role in this particular complex? So we're looking at the largest gas field on the planet. And the Qataris call it Northfield. And that extends into Iranian territory where it's kind of pars. But you've got something that the numbers get huge, but we think about a TCF of gas is a huge amount of gas. What's TCF again? So think of a LNG vessel. Yeah. Can hold somewhere the big ones. The QMAX is coming out at Qatar could be six BCF, billion cubic feet. A medium one would be four BCF. Got it. And so a TCF would be two hundred and fifty vessels. Do you think four BCF would be a really good boy band name? Yeah. Four BCF. Yeah. Sorry. Go ahead. I interrupted. I'm sure. I wouldn't have gone

there, but yes, four BCF. And a daughter might be into that. A good Haynesville well, a good Marcellus well might produce over its life 20 BCF. It could load four or five cargoes of LNG. So take that times a thousand, and that's the scale of

the field, of Northfield. Wow. And it's a gas field. It also produces a lot of condensate associated. And so it's a massive moneymaker. It sits west of the straight of Moose. Right. And so all of the LNG coming out of the Gulf, except Oman, is sort of trapped west of the Strait of Hormuz.

Wait, just to be clear, that field is Qatar and Iran. It goes into both. It's giant structure, largest gas structure on the planet. Okay. And it's shared. Geologically, it's shared. Operationally, it's absolutely not shared. But yes. Operationally, it's all. Operationally, the Northfield, what the Qataris is called Northfield, comes back to Qatar, gets liquefied there, loaded ships east out through the Strait of Hormuz, typically goes to Asia. This is what I was going to ask. So again, because it's so fractured, is it all Asia? Like, where's that gas going? And who's it competing with?

What's that market? So the global LNG market's about 500 million tons per annum. And the units will kill you. We're going to be converting between the easy of a million. The minute it gets on a vessel, it becomes a ton for whatever reason. Huh. And so out of that, you know, could talk. The three powerhouses of LNG are Qatar, the U.S., and Australia.

The Qataris have the lowest cost fields that condensate pays for the fields. They're never going to. They could give away the gas. And they sign these really long-term contracts, you know, around the world, but a lot into Asia. The U.S. is the other powerhouse. It doesn't sign long-term contracts. So if you went back in time, and let's say you're a Japanese utility and you're sitting on an island and you need something to be.

burn to spin a turbine and generate electricity. You're sort of indifferent. I got to bring a vessel in. I could bring a cargo of crude, you're going to bring some fuel oil, some diesel, or gas. And so I'm sort of indifferent. I'll pay roughly the same price for all of those. And so for half a century, we've always had oil-linked contracts for LNG. So when we think about JKM, they're often linked to a crude cocktail price in Japan. The U.S. comes along and breaks that and says, you know what, just pay me TTF. I'll take Henry Hub. I'll buy Henry Hub off of this flooded market in the U.S. Yeah. Liqueify it on the Gulf Coast mostly. I'll send it to where you want. And a bunch of merchants will capture that arm. And so it's a completely different pricing.

It's much more of a spot market than these big, heavily contracted Qatari volumes. And so now, You know, Asia's running around saying, I got force majeure out of Qatar. I don't have this. I got to go burn something else. And maybe I'll burn somebody else's LNG. But if not, I'll burn coal. I'll burn fuel oil, diesel. I need electrons. So speaking of arbing the price, so with so many different pricing benchmarks and now this dislocation, are you seeing any weird like price movements that people are like starting to look at and take advantage of? we're still well under what happened when Russia invaded Ukraine. Huh. So certainly Europe prices, and we could call them another alphabet soup, TTF or NBP, but TTF. So a price into the Netherlands has not gotten to nearly the levels it did during Russia, Ukraine. Some of that is it always felt, I remember in the end of 2021, people were wondering why Europe gas prices were so high.

And they're like, oh, those Russians are terrible. They don't know how to maintain production. In fact, they were just sort of slowly dialing down the gas in order to tighten the market. And then you invade in winter, February, peak demand. You know, now we're entering the shoulder season. In the spring and in the fall, it's beautiful outside in the northern hemisphere, and people don't need that same amount of gas. And so shoulder season is normally a terrible price for gas.

So that sort of helps. And what also helps is, you know, to a certain degree, Europe has weaned itself off Russian gas. and it feels like it has more options. We'll see how the things turn when we get toward the summer. Let's talk about, you know, one of the stories in the U.S. has been the rise of LNG exports, obviously the export terminals. Like, how much is that scaled up? You know, today in 2026, how much more are we exporting versus what we were in, say,

2016 or 2021 prior to the invasion of Ukraine? And what is the, how much capacity is going to come online and the coming years. Yeah, so if we wound back the clock, there's an interesting historic anecdote that's coming soon. So right now, Qatar is not selling LNG. However, there is an LNG terminal called Golden Pass. It's 30% X on 70% Qatar. It sits in Texas. It's loading now. And so in March, it might be that the next cargo that Qatar sells is a Texas cargo, not a Qatari cargo. And that's because this Golden Pass terminal was an import terminal, right? So if you go back far enough, before shale gas, the strategy in the U.S. was the U.S. is going to run out of gas.

It's going to get priced off of the price of diesel, right? I'm going to run out of gas. I'm going to have to need electricity. I'm going to go burn diesel. And so everyone had their favorite strategy. I'm going to build an import terminal and I'll bring in Katari gas or choose your favorite gas. and that'll save my energy bill. And then shale gas completely destroyed that strategy.

But along the way, ExxonMobil and Qatar had this import terminal, and they just flipped the switch and said, well, instead of being a regas terminal, let's make it an LNG terminal. And so that is loading as we speak. It'll start to sell cargoes as early as this month. And right now that's Qatar gas's only source of revenue until things get fixed in the Middle East. So speaking of shale, one of the legacies of... the shale boom is that a lot of energy companies got very nervous about over-expansion and ramping up supply. In a situation like this, what's your gut check on how fast LNG producers can really ramp

things up, both logistically and then just in terms of their sheer willingness and, I guess, in the face of their shareholders? So the gestation period of a shale gas well, if you're super quick, might be two, three-quarters, realistically. The gestational period, and of course these aren't gestational periods, of an LNG facility is four years. Wow. So if we anniversary, what happened four years ago, Russia invades Ukraine? What was the theme that started this year? Oh, there's going to be an LNG glut in 2026 and 27. And many an incorrect analyst hand raised has written about the approaching LNG glut. This event has changed that logic. And so the reason there was a glut this year is because

four years ago. Everyone ran out and said, I need LNG, I need the cavalry. Quick, call the cavalry. How long is it going to take, right? Four years. And so the answer is LNG facilities once built run full, right? There's an ability to debottleneck and run above nameplate, but basically there is no spare capacity. To a certain degree, we had OPEC with a bit of spare capacity that they released in the first, second week of the war. There is no equivalent on LNG. Every cargo would have gotten delivered anyway. So there's no flex in the system, and the system takes four years to fix. Eating well shouldn't be complicated, but somehow it turns into recipes, prep, clean up, and half your Sunday gone.

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And so we go back to this phase where Golden Pass was an import terminal. Yeah. And then we got to about, and so think of U.S. overall gas supply demand is about 120 BCF a day. A couple years ago, 10% of VACF a day. A couple years ago, 10% of that would have been LNG exports. Okay. Today, we just, we're getting close to 20b. It'll be 20%.

Wow. And so over the next, you know, out to 2030, we'll just be adding multiple BCF a day. And so it is the fastest growing part of U.S. gas demand. One of the controversies with export terminals, as you mentioned, not that long ago, we were absolutely swimming in free gas. And there was this concern that, well, if you start exporting it, it raises the domestic price because then you don't have these gluts anymore. Has the rise of LNG exports meaningfully raise the price of domestic gas consumption? I wish. As the E&P investor, that's the dream of all

E&P investors. We're sitting here entering the shoulder season and Henry Hubbs $3. It got to five, it got to six during the winter where the seasonal demand was the highest. There is no strong evidence that that extra 10 going to 20% of the demand wedge has, has changed price, right? What changes price is where supply equals demand. And up until now, the supply side's been perfectly willing to hand the market as much gas as the world wants, as the U.S. wants at $3.50. We think that's changed. I think that's changed. I think ultimately, certainly on shale oil, we're approaching a world where oil, your shale oil inventory five to ten years from now looks pretty lean. You're starting to see oil and gas companies

say, well, what do we do in a post-shael world, shale oil world? You know, what can we do? We can go international, right? So you've got, you can go to the Middle East. And certainly there are people there looking for shale oil or conventional oil, like the Shaw Gasfield today. People are looking at M&A. I'll just acquire my partners.

Some people are looking at gas. But, yeah, there is a sense that it is a, it's always been a finite resource. It had been a growing resource. And one where this learning curve had taken cost out every year, you know, that, That chapter has kind of passed, and now it's a world, if you're in a planning cycle of five to ten years and you look out five to ten years, you've got to go replace that stuff. How elastic is demand for something like NACS? Because I'm used to thinking about it as someone with a house in the Northeast and something that I have to buy every year unless I actually get really good at chopping firewood or something like that. But I imagine there must be some marginal source of demand that actually depends on the price.

So there's the demand for that which gas gives you, which electricity, and so there's substitution. So one thing to watch is bubbling behind the scenes, global thermal coal prices are starting to take off. They're up 30% year to date. What happened when Russia invaded Ukraine? Europe bought every LNG cargo they could, sucked it all the way into Europe. Asia was left saying, well, we're short electricity. Let's go burn some more coal.

let's consume more. And so thermal coal prices back in Russia, Ukraine, $300 a ton. Started the year at $100 a ton, we're up to $130. And so there's always going to be, there's some demand destruction, but people really like electricity and air conditioning and the things that it gives. And so the answer is you'll start to look for, certainly coal is an obvious place. And then eventually some demand destruction, but that's at kind of much higher levels. Do you have a read on Tracy as mentioned in the beginning? setting aside the straight of Hormuz, just pure infrastructure destruction. Do you ever read on how much Qatari production is going to be impaired in the medium to long term here?

So we know LNG terminals have a bit of momentum associated with them. And we've got pretty good experience in the Gulf Coast where hurricanes come through, you bring down your LNG facility, and you bring it back up. Same with oil platforms in the Gulf of America, a Gulf of Mexico. Hurricane comes through, you shut in, you come back. And so in general, oil and gas assets are built. They're built for turnarounds, right? They're built to go down and come back up, especially when you can plan ahead.

So you'll get whipsaws on the order of weeks. And so if this is over in weeks, right, we'll kind of have a big wedge of a month of chaos that'll filter through the economy. And if it goes on for months and months, it's something like, if we talk about the big three LNG, the U.S., Qatar, and Australia, they're kind of each a fifth, a fifth, a fifth of global.

supply. So something like 20% of the LNG would be knocked out. And that needs a lot of coal to replace or a lot of demand destruction. So just on this point, I think commodity markets in particular are very used to fading Middle East flare-ups very quickly. Is there any reason to believe that this time is going to be different? You have, you know, decades of experience in this space. Does it feel different to you? As a geologist and not a geopolitian, I'm not sure I'm the perfect guest for that answer. What the market is saying is that we're returning to normal. Right?

And so is the market right or wrong? I have a few signposts. And so one of the one, I'll use oil as an example, when you take the price of oil and you add in the crack spread, right, which is effectively what does the consumer pay for diesel, for gasoline, et cetera. When the cost of that gets to 7% of global GDP, right? The world says that's too much and you stop using it. And that's where we got in 2022.

Today, that'd be about a $120 crude, call it about a $60 crack spread. So on my screen, I can show you, oil never works a year forward when the cost of oil is 6% of GDP. And so that's kind of that. Wait, where are we right now? So today we're 100 plus 40. So crack spreads around 4. And these things are moving by the minute. But yeah, I call it about 140.

So we're not quite there. But there would be an exit alarm ringing if we did get to kind of 180 crude plus crack spreads. And then you'd say, I don't need to be a geopolitician. I just know every time this has happened, the global economy has gone blah. That's probably, geopolitics is a fake field, isn't it? No, I don't know about that. But geology, sorry, I think geology is more of a science than geopolitics, right? Well, anyone can fake being a geopolitical expert.

Geology doesn't change when you talk about it, but geopolitics changes when you talk about it. So the experimenter influences the experiment. You know, here's something I've wondered about, you know, again, Ned Gas, there's not a global market. But with the rise of LNG, have global markets become somewhat more correlated over time? Are we trending towards a global price of gas? Yes. And in fact, if you think of the role that Saudi Ramco plays when they're setting their official selling prices, they will look east and they'll look west.

And they'll see what are Atlantic Basin prices for oil and what are Pacific Basin. And they're not going to let anybody arb them away, right? So kind of they help set a law of one price. The Qataris that not only are sort of a fifth of LNG today, but growing, right, serve two markets. They can look east and they can look west. And so the idea would be, we used to have J. Cam, you'd have LNG, you'd have LNG, market over here and you'd have TTF over here, the Gattari's role in the market is to say, no one's going to arm me. We're smarter. We've got more customers than anybody. And they were going

to kind of link the price of LNG in Europe to the one in Asia. So we have kind of the law of one seaborne price of gas. And then you can compete against that. And then I can say, okay, if I build an import terminal here and the shipping is this much and the liquefaction to regas is this much, I can do this project. What's actually going on? with Russian LNG in Europe? Because you hear these very different stories. One is they're phasing out Russian imports. And then the other story is, well, Russian imports are at a record high. If Russian crude is getting a free pass on this conflict, then Russian LNG will likely get a free pass. And so, yeah, the answer is the longer this conflict takes. If you are a buyer and who are the

big buyers of LNG, right? Think about Europe and they're buying it for electric. Think about Japan, Korea, Taiwan, and China. And one of the strategies is diversity of supply is security of supply, right? That's kind of been a mantra when you look at the various utilities. And that's been proven absolutely correct. If anyone said, well, the Qataris are giving me the best deal, I'm going to be 100% linked to them. That was a terrible, in hindsight, choice. And so diversity of supply means Russia has boatloads of gas.

They've got pipe loads of gas now. they've got a customer that they're not friendly with anymore. And so their ability to build LNG and eventually, right, the problem with the pipeline is it goes from point A to point B. And so it is a marriage between the person putting stuff in one end of the pipe and the person taking stuff out of the other end. You can't move that pipe. The beauty of LNG is you don't have to get married.

You can kind of have lots of customers with benefits. You mentioned that, and I remember these stories after Ukraine, after the invasion of Ukraine, and Europe going around and trying to buy every LNG tanker that it could on the market and that there were poorer countries that essentially just got shut out. What was the next chapter there? What happened? What did they do? Yeah.

And so the challenge is there is probably there are two tons of demand for every LNG cargo. Right. So there are twice as many tons of regas. as there are liquefaction. And the way to think about that is a liquefaction terminal costs a thousand dollars a ton, and the ones in the Gulf Coast are big 10 million tons. So you're spending $10 billion for this terminal. Re-gas terminals are a tenth of that cost. So you invest in liquefaction as a liquefaction is the way out. Yep, exactly. And regas is the way in. Exactly. So the supplier does the liquefaction. The buyer does the regas. So you can build regas. So you can build regas.

terminals as an option, right? So you, and therefore, there are twice as many options. And so when the market is tight, you can have two people fighting for every cargo, which brings us back to the person that pays the most gets it. And then the answer is you need another form of source of electricity and it's developing economies are generally going to have access to coal, right? They'll have coal and power plants, and that's going to be their choice. That's right. So, yeah, The second place in fighting for an LNG cargo is to go buy coal. I'm going to change the subject slightly. In the grand tradition of us interviewing Bob, I'm just going to throw out a random commodity.

So anyone who came to our live show last year will know we had a segment with Bob where we just had the audience basically throw out random things. And Bob knew everyone. And ask him to talk knowledgeably on each of them for five minutes. So I'm going to do the same right now with sulfur and sulfuric acid. And the reason I ask is because, you know, I was in Abu Dhabi for. a while. And I remember Adnock, the big energy giant over there, striking some offtake deals for its sulfur. And I was very used to thinking of sulfur as a byproducts of crude oil, like this thing that is kind of useless. But to my surprise, it turns out it is in fact very useful because

you can make sulfuric acid out of it. And sulfuric acid is needed for things like etching of microchips. So I'm very curious what's happening to sulfur right now. Yeah. So the craziest thing happening to sulfur right now is this Shaw gas field in UAE is on fire. That gas field, 25% of the gas is high H2S, right? This is a, they call it a sour gas field. In the old days, if you ever went out to a well site that was H2S, right, Joe would have to shave. Because the equipment to cover, you need protective gear. You would have to shave too, right? I'd have to shave too. This is the whole oil will kill you thing. It would take you longer shave than me. Okay. And so you could always see the folks coming back from a sour gas field because

they'd gone clean shaven. And so here we have one of the largest sources of H2S and also it's about 10% CO2. Hopefully it's controlled, but that's an environmental, huge safety risk, right? So that's, that's worrying. Now, sulfur in general is not scarce at all. We got sulfur all over the place. This field produces sulfur. You can see if you ever go to Western Kazakhstan, the big Tangis Chevrole field, right, big piles of sulfur. Also, every copper smelter in the world generates sulfur because you'll take a mineral, you'll take something like a calcopyrite, kind of the copper version of fools gold, and it's a copper sulfide. And so if you ever visited a smelter, you got this big tower where you're in the old days, you just burn off the sulfur

dioxide, you make the tower tall enough so that that acid rain spreads across a large area. Or you can capture the sulfur. So around the world today, copper smelters lose money, right? You don't make money running a copper smelter. They call them treatment charges, refining charges. They're kind of zero and they're sometimes negative. So a copper smelter will ring me up as a copper miner and say, I want your copper concentrate. You can take that copper concentrate and normally you'll get the precious metal.

out of it. So I'll squeeze all the gold out of your copper ore and I'll make some money. Or I'll get an efficiency uplift. I'll pay for 95% conversion and I'll squeeze some out. The other product I get is sulfuric acid. So right now, copper smelters are looking and saying, hey, we're getting a revenue stream off of sulfuric acid. Most sulfur is going to go into agriculture. So if you've, you know, ammonium sulfate, for example, is an explosive, but it's also a great fertilizer. And so, for example, in Kazakhstan, the leading producer of uranium uses sulfuric acid in the operations. They compete with agriculture. And so when the market is tight sulfuric acid, you might say, hey, I got to let the people making food win. So you can have areas where you're

short sulfuric acid. We're taking sulfur off of the market. It's pretty abundant, and there will be sources, and there are lots and lots of copper smelters that can help convert it. So we'll find a way. So it's not clear to me that we've run out of sulfur. I think it's the fifth most abundant element in the crust. I love asking Bob just like random things. Let's just do this. I know you basically know all commodities, but you're not a soft sky, right? Didn't you like caveat that?

So you're not a... Things that were once lit. Yeah. If it comes from the earth, I'm more comfortable than if it wants... Right, the things that are grown from the earth. Got it. When we think about particularly the world... right now, and we've obviously oil and gas and sulfur. Are there any, what else do we be

watching? Any other weird? I think I saw there was a good headline in Bloomberg about zinc prices have surged. But anything else going up and to the right these days? Yeah. So if you think about aluminum's one. So if you went back to when Russia invaded Ukraine, everyone went and said, okay, what portion of which element does Russia produce? And at the time, a lot of nickel out of Russia, a lot of PGMs, platinum group metals and platoidium. And so people were like, oh, we're going to run out of those things. You know, this time around, the Middle East, from a mining perspective, doesn't mine a lot west of the Straits of Hormuz, but they process a lot. So smelters are basically an aluminum. People talk about aluminum as solid electricity. Most of the

cost to make aluminum is the electricity to make it in the smelter. And so therefore, you put aluminum smelters where you have cheap energy. And so we have some of the, certainly in Bahrain, we've got these very large aluminum smelters running off cheap local feedstock, natural gas, and you've seen aluminum price take off as a result. Zinc smelters are similar, not quite as energy intensive. And so to the extent that the Middle East was both a local and a global source of cheap energy. And so those that invested locally are seeing some of those consequences. zinc bar tops in danger. Why did that become a thing? Is zinc bar top? Yeah. Is this not a thing in America? In London, it used to be like if a bar

had a zinc bar top, it was like a thing. Oh, it was like a nice, classy. Yeah. It was, yeah. And I never really understood why people were really into zinc bar tops, but maybe we can, you know, start ripping them out and converting them out. Yeah, they probably will, yeah. You know, whether we're talking about domestic American gas or whether we're talking about oil, et cetera, I'm curious, like over the last year since Liberation Day. One of the stories, Tracy and I were up in Alaska. We were at a little manufacturer of an oil country tubular goods, and they were talking about, you know, the fluctuating price of steel and how this was creating all kinds of issues. What has been the effect in terms of domestic energy infrastructure from the tariffs and just the sheer cost

of, you know, building out the infrastructure? For the most part, energy has been somewhat exempt from the tariffs. Okay. The metal, so what did we have? We had aluminum tariffs in the U.S. and we'd steal tariffs. We've had this threat of copper tariffs that I think is distorting copper price. The oil patch, the gas patch, the energy patch, mostly been left alone. Okay. So that flow through of things like the domestic content of steel, right? That's shown up. But yeah, to first order, if you think about how the oil industry set their budgets this year, it wasn't based on tariffs. It was based on what was the price of oil on their screen? when we started the year.

Actually, related to this, one of the things we heard from the Trump administration coming in was that they were going to be very energy-friendly, you know, friendly to all the molecules, whether it's coal or gas or whatever. Have we actually seen policies that have helped those industries? Do people feel good about it right now? I would argue bombing Iran is a pro-oil price policy. Fair, fair. It took a year and a bit.

But ex-war, domestic policies. I guess. There's this tension between, you know, the fact that, you know, one of Trump's mantra seems to be low oil price, low gasoline price, he's extremely sensitive to that. And at the same time, he's sort of pro the oil industry. That's a very narrow path to tread. Yeah. Right. The oil industry makes money when oil prices are reasonable. Now, now, I would argue that a good mid-cycle price of oil, $75, $80, right? And that's where marginal producers can earn a return. we haven't really had that, right? And undisturbed, we haven't had that since Trump took office or much before.

We've been bouncing, you know, below 75. We've had a glut. The shale industry has been remarkably resilient, right? Amidst $60 oil, we haven't seen shale oil give up very much. And OPEC has been adding barrels to the market amidst kind of tepid demand. So we've kind of been under mid-cycle prices for oil through most of the Trump administration. and Biden post the solution in Russia, Ukraine. So, yeah, there is no policy.

So the question is, how do you get somebody to drill more in Texas? And, you know, first and foremost, it's the returns, right? So clarity of policy, permitting has improved. You'll hear folks in the oil patch say, right, some of the time you would spend to get things approved, permitted is improved. But that hasn't changed, right, the input, which is how many rigs are running, how many horizontal rigs? You know, how many frack spread throughout there?

One of the big themes, you know, of the last several years, kind of since we've been doing the podcast, but really since COVID, has been one thing after another that encourages basically every country in the world to think about sovereignty, resource security, and so forth. And so obviously COVID, major impetus to, like, make sure you have stuff.

Then the trade war, then Ukraine, now that war in Iran, et cetera. Like big structurally, when you think, about, I guess, the last six years now, are we going to be living with the ramifications of this six year period for years in terms of global commodity markets? So if you went back to the first world, second world, you had the West and you had the Soviet Union and you had sort of two complete supply chains of all the commodities, right? There were Soviet smelters and there were Western smelters. And there was just a lot of redundant capacity. Yeah. Then you sort of got into the 90s and you had the collapse of the Soviet Union. And you had,

At the same time that China rose, you were lucky enough. So the China super cycle, the China demand super cycle came in a point in time where you had all of this excess capacity undermanaged, right? So all you needed was a bit of capitalism applied to Soviet assets. And that was sort of the only reason China could feed on consuming half of the world's copper and half of the world's deal and half of the world's, et cetera. Now we're almost flipping that and we're say, well, you know, know what, China has a bunch of rare earth processing, but now Japan and Malaysia will have it. Now the U.S. is going to have it. And tariffs on copper. Well, the U.S. needs to be self-sufficient in copper. So we're entering sort of the long cycle of globalization where are we going to

recapitalize the end of globalization? We're going to go out and build two smelters or five, or however we're going to divide the planet. It's very capital intensive. It's inefficient. it would be powerful for, it's inflationary. Yeah. And then someday, in the next cycle, we release it all. Right. So, yeah, so that's, again, a geopolitician's view. Like, is globalization over?

If a geopolitician convinces you of that, then there's going to be a lot of asset. Yeah, it's a big story. Yeah, it's a big story. All right, I have one tiny question. Tracy's going to love it. Do you watch Landman? I have watched. I tend to binge watch when I get a chance.

So I binge watch the first season. and I have not binge watched the second. Does it feel realistic to you? Is that a real... My lived experience has very little... Yeah. Versus Landman. I would just like to say

a significant portion of my life right now is listening to Joe to talk about Landman. I'm obsessed with the show. I love Landman so much. Anyway. Bob Breck... Landman is the Moby Dick of our times. Bob Brackett, thank you so much

for coming back on Outlaws. Always a true... It's a true pleasure. Thank you so much, Joe. Thanks, Tracy. Thanks so much, Bob. That was great, as always. Yeah.

God, I love talking to Bob so much. One thing with a lot of energy episodes is that, and I've mentioned it, we both mentioned it. Energy math is not intuitive to me, you know, like I have a very hard time conceptualizing. Like, what is a billion cubic feet or whatever? But in that gas, especially with all the conversions that happen between the liquefaction, it's like, I find it really good cause. No, I sympathize. I was one of those like toddlers that was trying to stick like triangle pieces into round holes. Yeah. I've always struggled to sort of visualize shapes and sizes. So absolutely. We're in cells and we're not sure. Yeah. Yeah. That's exactly it. But there is a bunch of stuff that stood out from that episode.

One thing I should just clarify, because I don't mean to make light of, you know, I asked about the Trump administration being energy friendly to domestic U.S. energy producers. and Bob was like, well, the war is very friendly, and I kind of waved it off. Like, it is a huge giveaway to U.S. energy. And, you know, Isabella Weber, another great Oddlots guest, had a paper about, like, where the value of these higher oil prices actually flows to. And it's all the U.S. energy companies. Trump said it himself. Yeah, no, absolutely.

He said it in one of his truth social posts, something like that. He's like, we're actually going to make more money. Yeah. You know, because most people are not. oil producers. Most people are oil consumers. And so people are not happy that gas prices. But you like sort of spun it. He's, oh, look, we're going to make a lot of money because we're a net oil exporter, an energy exporter now between LNG and crude. So yes, clearly domestic energy has benefited, obviously benefiting, you know, quite a wave that it's riding because obviously

the demand for LNG after the invasion of Ukraine. That's a very big story. Yeah. And I also think this brings us back to the episode we recorded on the impact of the Strait of Hormuz closure on China's economy. Yeah, yeah. And this idea that, well, the more disruptions to commodity supply you have like this, the more you have governments sort of worried about choke points, materializing, the more you're going to see a hasten shift to renewables that might be more immune from these types of disruptions. I hadn't appreciated. at all until Bob said it at the very end that, you know, like when we think of the early 2000s,

you know, the commodity super cycle driven by China, but that for the first several years of Chinese opening up, they really benefited from the fact that there was just a glut of capacity, that the combining of global, which I hadn't really thought about at all that is like, from an economic perspective, there was a lot of capacity to supply China with raw commodities, particularly in the mid-90s, simply due to the fact that, you know, as he said, apply a little bit of capitalism to those Soviet assets

and suddenly you have a lot of production brought online. The 90s were a special time. Everything was just working out. Peak humanity. I would argue. All right. Shall we leave it there? Let's leave it there.

This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wisenthall. You can follow me at the stalwart. follow our producers, Carmen Rodriguez, at Carmen Armand, dashiel Bennett at Dashpot, and Kale Brooks at Kail Brooks. And for more Odd Lots content, go to Bloomberg.com slash Odd Lots for a daily newsletter on all of our episodes.

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