How is the war with Iran impacting global oil prices—and could the Strait of Hormuz trigger the next energy crisis? In this episode, Lisa sits down with former U.S. Energy Secretary Dan Brouillette to break down the extreme volatility in the oil markets, the risks facing global shipping, and how energy traders are trying to price uncertainty during a geopolitical conflict.
Brouillette explains why oil prices surged from the mid-$70s to $120 in just hours, how the Trump administration’s proposed $20 billion tanker insurance backstop could stabilize shipments through the Strait of Hormuz, and why the Strategic Petroleum Reserve is at a dangerously low level. He also reflects on how deregulation during the Trump administration helped make the United States a net energy exporter and what that means for energy security today.
The conversation also explores the global implications of bringing Venezuelan oil back into the market, China’s reliance on discounted energy, and how geopolitical shifts could reshape the world’s energy supply. Plus, Brouillette discusses the massive power demand coming from AI and data centers, why nuclear energy may be the key to meeting future electricity needs, and how cybersecurity and quantum computing could transform energy infrastructure.
Topics covered include:
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Why oil prices are swinging wildly during the Iran conflict
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The strategic importance of the Strait of Hormuz
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Trump’s tanker insurance plan and global shipping risks
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The state of the U.S. Strategic Petroleum Reserve
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Energy independence and deregulation under the Trump administration
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Venezuelan oil and China’s discounted energy supply
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The massive energy demand from AI and data centers
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Why nuclear power could be critical for America’s energy future
A must-listen for anyone following energy markets, geopolitics, oil prices, and the future of global energy security.
Follow Clay & Buck on YouTube: https://www.youtube.com/c/clayandbuck
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Welcome to the Truth with Lisa Booth.
Speaker 2 (00:06):
We'll get to the heart of the issues that matter
to you today.
Speaker 1 (00:09):
We're talking about oil.
Speaker 2 (00:11):
Oil prices have been swinging wildly and the straight of
removes effectively closed amid the war with Iran, and the
global energy markets are on the edge as a result.
So we've got former US Energy Secretary Dan Bururette. He
worked for President Trump during his first term, and we're
going to ask him to break it all down. You
know why traders are panicking whether this twenty billion dollar
insurance backstop that President Trump is proposing will help also
(00:34):
Biden and drained the Strategic Petroleum Reserve, So what sort
of a position does that put us in? Are we
in a dangerous position? So we're going to talk about
all of that and more oil, energy, the price of energy,
and what you should know moving forward. So straight talk
from the man who ran the Energy Department during a
really interesting time President Trump's first term. So stay tanned. Well,
(01:00):
great some for you on the show. We've got the
former Energy Secretary Dan Bruett. Thank you for making the time, sir.
Speaker 1 (01:07):
Well, thank you, Lis. Great to be with you.
Speaker 2 (01:09):
There's a lot going on in the world right now
when it comes to energy and oil, we have seen
a lot of volatility in the market as well as
a result of what's the war and Iran?
Speaker 1 (01:21):
What are traders most worried about right now?
Speaker 2 (01:23):
So what's driving sort of these huge swings and oil
prices that we've seen.
Speaker 1 (01:27):
Well, you know, it's trying to price risk. That's what
they're struggling struggling with right at the moment, is how
do you price this risk? And it it involves a
number of different things, obviously price, but also things like duration.
How long is this conflict? Can allows you know, when
will these shipments be able to make it through the
strad When are we going to get the oil that
we contracted for two months ago, three months ago, four
(01:50):
months ago. It's just pricing that type of risk. And
what happens in the marketplace is that when producers declare
things like force majure, like we saw in the l
in G space and Katar. You know what that basically
means is we understand you, we've got a contract with you,
but we're not going to provide the product. So what
happens is there's a mad scramble for whatever is available
(02:11):
on the marketplace, and that means barrels on other ships.
In the case of LNG, it means cargoes on other ships.
It's just this mad scramble for what is known as
this replacement barrel or the replacement cargo. And that's what
you see in the pricing today. So that's why we
went from roughly mid seventies or so to literally one
hundred and twenty bucks in about what twenty four hours,
(02:33):
thirty six hours, something like that, and then all the
way back down to low eighties. But that's what that's
all about, and it's really about, you know, it's really
the psychology of the marketplace rather than the physical availability
of a oil or a production of oil.
Speaker 2 (02:48):
I should say, kind of reminds me after a liberation
Day with the sort of volatility we saw, you know,
how challenging. I mean, obviously, if you're the Trump administration,
you can't exactly map out with you one hundred percent
certainty how long this war is going to last. We've
seen Sexuary hug Seth sort of give a more undefined timeline.
(03:08):
We've seen President Trump recently say it could be a
month and kind of tighten the timeline. How much of
that from the President. Do you think isn't reaction to
sort of the volatility we're seeing.
Speaker 1 (03:20):
Oh, I think it's a factor. I mean, I don't
think that it's completely dependent upon that. I mean, he's
looking at this as a military exercise, not an economic
exercise per se. But I do think it has an
impact on his decision, and it has to. He has
to be mindful of all of the trickle down effects,
if you will, or you know, the sort of the
after effect of whatever activity that you're undertaking with regard
(03:40):
to the military. So I think it's a factor, But again,
I don't think it's the primary decision I think, or
the primary factor. The President, as I understand it, is
taking a very long term view of this. You know,
the strait of horror moves. Everyone has known. If you've
been in the energy business for a while, you've known
that that's a choke point. You know that it's vulnerable
and it has the need to impact world markets. But
(04:03):
you know, the President has said that he wants to
correct the situation. We've got a regime in Iran that's
owned that piece of geography for forty seven years and
they've used it as a weapon against the rest of
the world, and the President says enough enough, So he's
taken a long term view and he's going to rectify
the situation.
Speaker 2 (04:21):
Well, we've seen ships rightfully concerned with trying to pass
through the straight makes a lot of sense right now.
The administration's trying to stabilize shipping with a twenty billion
dollars insurance backstop for tankers. From your experience running the
Energy Department, well, is that enough to convince companies to
send ships back into the region and to get the
(04:42):
job done?
Speaker 1 (04:44):
Yeah? I think it is because as I understand what
they're offering, it's called reinsurance, so it's not what's called
first loss coverage. Those are companies that for instance Lloyd's
of London, you know, others who provide that first coverage
in the marketplace. What I think the President is offering
through the DFC here is backstop coverage reinsurance for those
(05:07):
first loss insurers. It allows them basically to spread their
risk over a bigger pool of capital. So that's not
assuming all of this loss by themselves, and is the
way the financial markets work that twenty billion dollars can
be strenched out to provide roughly one hundred billion or
two hundred billion worth of coverage in the marketplace, So
(05:29):
it is an ample amount of money in my view.
Now that's coming with the understanding that I'm not in
this business and I don't see what the daily risks are,
but my instinct tells me, after spending twelve years with
USAA down in San Antonio in the insurance business, that's
going to go a long way to relieving a lot
of the psychological fear, if you will, and risk of
(05:49):
putting your ships into that strait.
Speaker 2 (05:51):
And then you also have the security factor to fear
of wanting to take on that job as well, given
the volatility.
Speaker 1 (05:58):
And yeah, that's true, that's truly. So. I mean, you know,
a lot of the conversation has been focused on the
commercial aspects of this, but look, if you're a ship captain,
are more importantly, not more importantly, but if you know importantly,
if you're a CEO of one of these companies, you
know you're thinking about your employees and you don't want
to put them in harm's way. So sometimes it doesn't
matter what the insurance coverage might be, it's just you
(06:18):
won't put your people in harm's way. In rightfully So
that's why I think what the President is proposing, you know,
this insurance regime or this insurance plan, combined with a
more visible residence of the US Navy in the Strait,
those two things combined, I think are going to do
go a long way to alleviating that that risk that
(06:40):
that people see today.
Speaker 2 (06:42):
You know, we keep hearing about the Strategic Petroleum Reserve,
and you know, obviously you know, as everyone knows our
emergency oil savings account, it's around four hundred and fifteen
barrels right now. I believe, oh, uncomfortably low is that
I know, you know, Biden is to blame for draining
it pretty significantly.
Speaker 1 (07:00):
What sort of position does that put us in? Not
a good one, to be blunt, not a good one. Look,
I think you know it holds roughly seven hundred, seven
hundred and fifteen million barrels. We want to keep that
as close to that number as possible because you never
know what's going to happen and what it's there for
or actual emergencies. It's when you cannot physically get a
(07:21):
barrel of oil, you know, there's a complete stoppage in
the marketplace. That's what it's there for. And it takes
a lot of oil to replace that. If you ever
reached that point, and we did back in nineteen seventy three,
which is why the reserve was created in nineteen seventy four.
Those were true emergencies. We're not there yet with this,
you know, this conflict in the Middle East. We're nowhere
near it because we're supplied with you know, with oil
(07:45):
today in the marketplace. I think our total production number
worldwide is somewhere around one hundred and six million barrels
per day, or demand is somewhere around one hundred and
four one hundred and five, So we clearly have enough
supply in the marketplace. What we're dealing with is a
logistics problem just getting it through the straight It's an
infrastructure problem getting the product to market. The President's dealing
with that from a you know, a military standpoint, which
(08:06):
is the right approach. But it doesn't mean that we
have to fleep the strategic patrol in reserve at this point.
I would suggest that we don't want to do that
given its low, relatively low status at the moment. I
think it's roughly fifty eight percent full, give or take,
based on what we know today.
Speaker 2 (08:25):
You know, walk us through what you did as energy
secretary during President Trump's first term and what he's done
so far on the second term, and which is energy
independence at large and kind of how that has positioned
us to where we currently are.
Speaker 1 (08:38):
Yeah, no, happy to to you know, to shair some
of the things we did in the early part of
the first time the president when Brent Perry was the
secretary in the first half of the first term. I
was a secretary in the second half, but in the
first half, I was a deputy secretary. So I worked
closely with Rick and the team, you know, to work
on the president's agenda. He called us in very very
early and he said, look, here's the deal. We have
(08:59):
too much regular in this industry. People are hamstrung. They
can't produce the way they want to produce. Importantly, he said,
you know, they can't export and they can't move the
product around as easily as they would like to. You
guys need to get busy looking at these regulations and
see who we can do. And then he reminded us,
and you may remember this, he said, if you're going
to propose new regulation and for everyone you propose, you
(09:22):
got to eliminate too. That was the very direct order
he gave us. So that's exactly what we did, and
we went to work working on things like liquified natural gas,
which was a growing industry here in the United States
and still is. But we did very simple things. I'll
just give you a quick example. If you wanted to
build a small LNG facility for expport, here in the US,
(09:42):
you first have to come to the Department of Energy
and get what's known as a public interests permit. And
what it basically said was, yeah, you know it would
be in the public interest if you, mister capitalists, put
your money at risk to build this facility, as if
the Department of Energy knows anything about investment or knows
anything about what might be in the public interest. And
(10:02):
then if you got that, you went over to the
Federal Energy Regulatory Commission to get the actual permit to
build the facility. But then it was one more step.
If you wanted to export that LNG, you had to
come back to the Department of Energy and ask for
permission to export the product. So three big steps that
are enormously expensive. It is not uncommon for this to
cost tens of millions of dollars in legal fees and
(10:24):
everything else to get these permits. So we eliminate the
first step you just as I said. You know, Rick
and I got together and we said, wait a minute,
you know anything about you know, how do you do
this in terms of an investment. It's not our money
that we're putting at risk, it's they're putting their own
money at risk in the free market. If they lose
their money, they lose their money. Why are we just
holding them up to getting these permits? So we eliminated
(10:47):
those kinds of things. It's a very common sense approach
to how you approach regulation, and it really did unleash
a lot of investment. We had a number of final
investment decisions and I went forward. During our first term,
we did a number of other things, but I guess
to sum it all up, the President gave us a
very direct war, use common sense before you propose these things,
(11:09):
and use common sense to see what you might be
able to undo. And as a result, in twenty nineteen,
we became a net energy exporter here in the United
States for the very first time in my lifetime. So
it became energy and dependent, if you will. In twenty nineteen,
you know.
Speaker 2 (11:24):
Which is obviously great, and you know, I would just
be doing It's wild that, you know, that wouldn't be
the goal all waste. There's talk about you look at
that in the developments in the United States. But you
also there's also been talk about bringing more of Venezuelan
oil back into the market to trendy easy when you
look at what President Trump's done with Maduro and now
(11:46):
we sort of have a more helping hand. I guess
you could say Venezuela controlling hand. I don't know, ever,
you know, and then looking ahead at what is potential
in Iran depending on how everything goes down there, what
does that mean for oil for the United States and
just for the world moving forward. If you can kind
(12:08):
of get Middle East under control, and then we also
have more control in Venezuela.
Speaker 1 (12:12):
Well, I mean you're limiting that choke point that we
talked about earlier in the Strait of Hormuz. So I mean
Venezuela is on the water obviously, so I mean they
have an oil that they producer. It is called heavy
sour crude. And fortunately many of the refiners here in
the US Gulf Coast are set up to refine exactly
that type of oil, and they did for many, many years.
So Petavesa, which is a national oil company in Venezuela,
(12:34):
was actually one of the better run oil companies in
the world up until the Shobas administration took it over
and literally ran it in the ground, and then Maduro
whatever was left of it, he ran, you know, he
ran into the ground. But it was a very well
run oil company and a lot of again, a lot
of our refiners are set up for that for that
type of oil. The larger point, though, is that because
(12:55):
it's available, that doesn't get stuck in these choke points.
You know, it reduces the rittis around the world, not
just the United States, but around the world that that
oil can become available, and I think that's the important
work that President Trump is doing. The other point I'll
make too is that right now, Maduro and Delsea Rodriguez
to some degree, but Maduro, because he was sanctioned, because
(13:16):
Padavesa was sanctioned, didn't really have a market for that oil,
with the exception of China. So they had to sell
that market at a discount, a pretty steep discount, about
ten to fifteen dollars barrel, and most of it was
going to China, much the same way that much of
the Iranian oil today is going to China at a
large discount. So it'll be important to see how bringing
(13:39):
Venezuela back online. Perhaps once this conflict is done in
the Middle East, if Iran chooses to return to civilized
society and their oil comes back on the market, it'll
be interesting to see how stable the world markets become
as a result of that. It'll also be interesting to
see how China deal with the loss of discounted oil.
(14:02):
Keep in mind, they're in export country. They rely on manufacturing,
they're heavily energy independent. If their energy costs go up
because they don't have access to this discounted oil, it'll
be interesting to see what happens to their inflation numbers,
and then, by extension, what happens to their positioning in
the world economy. So there's a lot going on. It's
a very very busy time, but it's also an exciting
(14:25):
time if these regimes go away and this energy comes
back to the world market. Got to take a quick
commercial break.
Speaker 2 (14:32):
If you like what you're hearing, please share on social
media or senate to your family and friends.
Speaker 1 (14:39):
This is a bit random.
Speaker 2 (14:40):
But when you look at our power grid and you
look at AI and data centers, how much pressure is
that putting on our power grid? Is that something to
be thinking about.
Speaker 1 (14:49):
Oh yeah, an enormous amount of pressure. And it's not
just data centers, it's the economic growth. It's a bit misleading.
Some of the press coverage I've seen or recently tends
to for at least that the addition of a data
center actually, you know, just linear, your progression puts that
amount of pressure on the grid. There's no question that
(15:09):
their energy intents. But more and more of these hyperscalers
and more and more of these data center developers are
putting generation behind the grid and they're willing to pay
for their own generation, and that's an important step forward.
But when you just look at the growth curves, they're
they're phenomenal. I mean, it's just amazing how much we're
talking about. I was just reviewing some data for some
(15:30):
work I'm going to do with Standford Business School this week,
and you know, we're going to move these are these
are metrics that no one really understands, but I'm going
to say them anyway. We're going to move from about
four hundred tarawahde hours worldwide to over one hundred tarratwade hours.
Just trust me, those are big numbers. But that difference
is the size of the economy of Japan. That's how
(15:51):
much energy they use in Japan. So the growth rate
in data centers over the course of the next six
years is the equivalent of adding the entire higher country
of Japan to the world energy market. That's how big
these things are.
Speaker 2 (16:05):
That's greaty, So how are we going to sustain that?
Speaker 1 (16:07):
Well? I think I think, you know, again back to
what President Trump was doing in the very first or
early parts of the term, our term. You know, he
was very interested at that time in nuclear power, and
he thought that that was an answer. And he was very,
very frustrated, candidly with our inability to build nuclear here
in the United States. And you know, as one of
the areas where he really pushed Rick and I and
(16:28):
he pushed the NRC. He said, you've got to figure
this out. He said, you know, it seems like France
builds one every month, and we can't build one except
for every thirty years, So what's going on here? And
he was exactly right. And you know, he also recognized
very early that we were dependent upon Russia for our
nuclear fuel cycle. We were as dependent on Russia as
a matter of fact, as Germany was for natural guests.
(16:50):
You know, Germany was buying natural gas from Russia for years,
and Mike Pompeio and I spent a lot of time
over there telling him, you're too dependent on Russia. What
turns out that we were very on Russia for for
nuclear fuel. So we started a program at due to
create what's called high SA l EU each a l
EU HALU, and what that is is a fuel source
(17:11):
for these very advanced to very small modular reactors. And
it's an exciting time in the nuclear business because if
these things are commercialized in the next two to three
to four five years, we can actually meet that demand
that I just talked about with regard to data centers
and some of the other things that we're seeing on
our electricity grid today.
Speaker 2 (17:29):
But you know, as we rely more on AI as
a society, we already know where power grid is.
Speaker 1 (17:34):
Susceptible to attack.
Speaker 2 (17:37):
So does that put us in a more vulnerable position?
Speaker 1 (17:40):
Yeah, of course, everyone's in a vulnerable position when you
think about cybersecurity, I mean, our lives have become so
dependent upon online services of one type or another that
you're almost by definition, exposing yourself every time you get
on your telephone. So everybody's vulnerable to some degree. What
I think we've done a fairly good job with regard
to the grid is cutting off the access to more
(18:04):
sensitive types of information that Iran or North Korea, Russia,
whoever it might be, I would have access to. And
I think today, with the adoption of AI and with
some of the with some of the developments around things
like quantum computing, we've been able to severely reduce the
cyber risks that we faced ten years ago. Quantum computing
(18:24):
in particular is very, very interesting, and I won't get
into the details, but when you're dealing with cubits and entanglement,
it may at some point in the future make cybersecurity
completely irrelevant because there's just no way to break the
encrypted data that goes over a quantum computer.
Speaker 2 (18:44):
I'm realizing there's a lot I still need to.
Speaker 1 (18:45):
Learn from before we go.
Speaker 2 (18:51):
Is there anything else you'd like to leave us with?
Speaker 1 (18:54):
Just the simple fact that I'm excited. I mean, we
all our hearts all go out to the men and
women who serve in the military and have to defend
us each and every day, and who are fighting the
conflict that we see in the Middle East. The fact
of the matter is is that once this is over
and everybody comes home and the energy markets stabilize, we're
all going to realize that the work that we've all
done over the course of the last two decades or
(19:15):
so to make America more energy dependent is really going
to pay enormous dividends over the course of the next
two decades. And that's exciting because as we think about
how our economy is going to be shaped by artificial intelligence,
all the technologies that are being developed, we hope that
they're built here because that means jobs, and it means
economic security for all Americans, and I'm excited about that.
Speaker 2 (19:35):
I want to thank you as Secretary, but you told
me to call you Dan, so I'm going to say Dan,
very very interesting. Learned a lot from you. I still
have a lot to learn with some of the last
parts of the conversation with AO. I really appreciate you
making the time, sir, well.
Speaker 1 (19:51):
Thanks for having me. It's been fun.
Speaker 2 (19:53):
Those Former Energy Secretary Dan Burretts appreciate him for making
the time to come on the show. Appreciate you guys
at home for listening every Tuesday and Thursday, but you
can listen throughout the week. I also wanted to thank John, Cassie,
and my producer for putting the show together.
Speaker 1 (20:04):
Until next time.
Welcome to the Truth with Lisa Booth.
Speaker 2 (00:06):
We'll get to the heart of the issues that matter
to you today.
Speaker 1 (00:09):
We're talking about oil.
Speaker 2 (00:11):
Oil prices have been swinging wildly and the straight of
removes effectively closed amid the war with Iran, and the
global energy markets are on the edge as a result.
So we've got former US Energy Secretary Dan Bururette. He
worked for President Trump during his first term, and we're
going to ask him to break it all down. You
know why traders are panicking whether this twenty billion dollar
insurance backstop that President Trump is proposing will help also
(00:34):
Biden and drained the Strategic Petroleum Reserve, So what sort
of a position does that put us in? Are we
in a dangerous position? So we're going to talk about
all of that and more oil, energy, the price of energy,
and what you should know moving forward. So straight talk
from the man who ran the Energy Department during a
really interesting time President Trump's first term. So stay tanned. Well,
(01:00):
great some for you on the show. We've got the
former Energy Secretary Dan Bruett. Thank you for making the time, sir.
Speaker 1 (01:07):
Well, thank you, Lis. Great to be with you.
Speaker 2 (01:09):
There's a lot going on in the world right now
when it comes to energy and oil, we have seen
a lot of volatility in the market as well as
a result of what's the war and Iran?
Speaker 1 (01:21):
What are traders most worried about right now?
Speaker 2 (01:23):
So what's driving sort of these huge swings and oil
prices that we've seen.
Speaker 1 (01:27):
Well, you know, it's trying to price risk. That's what
they're struggling struggling with right at the moment, is how
do you price this risk? And it it involves a
number of different things, obviously price, but also things like duration.
How long is this conflict? Can allows you know, when
will these shipments be able to make it through the
strad When are we going to get the oil that
we contracted for two months ago, three months ago, four
(01:50):
months ago. It's just pricing that type of risk. And
what happens in the marketplace is that when producers declare
things like force majure, like we saw in the l
in G space and Katar. You know what that basically
means is we understand you, we've got a contract with you,
but we're not going to provide the product. So what
happens is there's a mad scramble for whatever is available
(02:11):
on the marketplace, and that means barrels on other ships.
In the case of LNG, it means cargoes on other ships.
It's just this mad scramble for what is known as
this replacement barrel or the replacement cargo. And that's what
you see in the pricing today. So that's why we
went from roughly mid seventies or so to literally one
hundred and twenty bucks in about what twenty four hours,
(02:33):
thirty six hours, something like that, and then all the
way back down to low eighties. But that's what that's
all about, and it's really about, you know, it's really
the psychology of the marketplace rather than the physical availability
of a oil or a production of oil.
Speaker 2 (02:48):
I should say, kind of reminds me after a liberation
Day with the sort of volatility we saw, you know,
how challenging. I mean, obviously, if you're the Trump administration,
you can't exactly map out with you one hundred percent
certainty how long this war is going to last. We've
seen Sexuary hug Seth sort of give a more undefined timeline.
(03:08):
We've seen President Trump recently say it could be a
month and kind of tighten the timeline. How much of
that from the President. Do you think isn't reaction to
sort of the volatility we're seeing.
Speaker 1 (03:20):
Oh, I think it's a factor. I mean, I don't
think that it's completely dependent upon that. I mean, he's
looking at this as a military exercise, not an economic
exercise per se. But I do think it has an
impact on his decision, and it has to. He has
to be mindful of all of the trickle down effects,
if you will, or you know, the sort of the
after effect of whatever activity that you're undertaking with regard
(03:40):
to the military. So I think it's a factor, But again,
I don't think it's the primary decision I think, or
the primary factor. The President, as I understand it, is
taking a very long term view of this. You know,
the strait of horror moves. Everyone has known. If you've
been in the energy business for a while, you've known
that that's a choke point. You know that it's vulnerable
and it has the need to impact world markets. But
(04:03):
you know, the President has said that he wants to
correct the situation. We've got a regime in Iran that's
owned that piece of geography for forty seven years and
they've used it as a weapon against the rest of
the world, and the President says enough enough, So he's
taken a long term view and he's going to rectify
the situation.
Speaker 2 (04:21):
Well, we've seen ships rightfully concerned with trying to pass
through the straight makes a lot of sense right now.
The administration's trying to stabilize shipping with a twenty billion
dollars insurance backstop for tankers. From your experience running the
Energy Department, well, is that enough to convince companies to
send ships back into the region and to get the
(04:42):
job done?
Speaker 1 (04:44):
Yeah? I think it is because as I understand what
they're offering, it's called reinsurance, so it's not what's called
first loss coverage. Those are companies that for instance Lloyd's
of London, you know, others who provide that first coverage
in the marketplace. What I think the President is offering
through the DFC here is backstop coverage reinsurance for those
(05:07):
first loss insurers. It allows them basically to spread their
risk over a bigger pool of capital. So that's not
assuming all of this loss by themselves, and is the
way the financial markets work that twenty billion dollars can
be strenched out to provide roughly one hundred billion or
two hundred billion worth of coverage in the marketplace, So
(05:29):
it is an ample amount of money in my view.
Now that's coming with the understanding that I'm not in
this business and I don't see what the daily risks are,
but my instinct tells me, after spending twelve years with
USAA down in San Antonio in the insurance business, that's
going to go a long way to relieving a lot
of the psychological fear, if you will, and risk of
(05:49):
putting your ships into that strait.
Speaker 2 (05:51):
And then you also have the security factor to fear
of wanting to take on that job as well, given
the volatility.
Speaker 1 (05:58):
And yeah, that's true, that's truly. So. I mean, you know,
a lot of the conversation has been focused on the
commercial aspects of this, but look, if you're a ship captain,
are more importantly, not more importantly, but if you know importantly,
if you're a CEO of one of these companies, you
know you're thinking about your employees and you don't want
to put them in harm's way. So sometimes it doesn't
matter what the insurance coverage might be, it's just you
(06:18):
won't put your people in harm's way. In rightfully So
that's why I think what the President is proposing, you know,
this insurance regime or this insurance plan, combined with a
more visible residence of the US Navy in the Strait,
those two things combined, I think are going to do
go a long way to alleviating that that risk that
(06:40):
that people see today.
Speaker 2 (06:42):
You know, we keep hearing about the Strategic Petroleum Reserve,
and you know, obviously you know, as everyone knows our
emergency oil savings account, it's around four hundred and fifteen
barrels right now. I believe, oh, uncomfortably low is that
I know, you know, Biden is to blame for draining
it pretty significantly.
Speaker 1 (07:00):
What sort of position does that put us in? Not
a good one, to be blunt, not a good one. Look,
I think you know it holds roughly seven hundred, seven
hundred and fifteen million barrels. We want to keep that
as close to that number as possible because you never
know what's going to happen and what it's there for
or actual emergencies. It's when you cannot physically get a
(07:21):
barrel of oil, you know, there's a complete stoppage in
the marketplace. That's what it's there for. And it takes
a lot of oil to replace that. If you ever
reached that point, and we did back in nineteen seventy three,
which is why the reserve was created in nineteen seventy four.
Those were true emergencies. We're not there yet with this,
you know, this conflict in the Middle East. We're nowhere
near it because we're supplied with you know, with oil
(07:45):
today in the marketplace. I think our total production number
worldwide is somewhere around one hundred and six million barrels
per day, or demand is somewhere around one hundred and
four one hundred and five, So we clearly have enough
supply in the marketplace. What we're dealing with is a
logistics problem just getting it through the straight It's an
infrastructure problem getting the product to market. The President's dealing
with that from a you know, a military standpoint, which
(08:06):
is the right approach. But it doesn't mean that we
have to fleep the strategic patrol in reserve at this point.
I would suggest that we don't want to do that
given its low, relatively low status at the moment. I
think it's roughly fifty eight percent full, give or take,
based on what we know today.
Speaker 2 (08:25):
You know, walk us through what you did as energy
secretary during President Trump's first term and what he's done
so far on the second term, and which is energy
independence at large and kind of how that has positioned
us to where we currently are.
Speaker 1 (08:38):
Yeah, no, happy to to you know, to shair some
of the things we did in the early part of
the first time the president when Brent Perry was the
secretary in the first half of the first term. I
was a secretary in the second half, but in the
first half, I was a deputy secretary. So I worked
closely with Rick and the team, you know, to work
on the president's agenda. He called us in very very
early and he said, look, here's the deal. We have
(08:59):
too much regular in this industry. People are hamstrung. They
can't produce the way they want to produce. Importantly, he said,
you know, they can't export and they can't move the
product around as easily as they would like to. You
guys need to get busy looking at these regulations and
see who we can do. And then he reminded us,
and you may remember this, he said, if you're going
to propose new regulation and for everyone you propose, you
(09:22):
got to eliminate too. That was the very direct order
he gave us. So that's exactly what we did, and
we went to work working on things like liquified natural gas,
which was a growing industry here in the United States
and still is. But we did very simple things. I'll
just give you a quick example. If you wanted to
build a small LNG facility for expport, here in the US,
(09:42):
you first have to come to the Department of Energy
and get what's known as a public interests permit. And
what it basically said was, yeah, you know it would
be in the public interest if you, mister capitalists, put
your money at risk to build this facility, as if
the Department of Energy knows anything about investment or knows
anything about what might be in the public interest. And
(10:02):
then if you got that, you went over to the
Federal Energy Regulatory Commission to get the actual permit to
build the facility. But then it was one more step.
If you wanted to export that LNG, you had to
come back to the Department of Energy and ask for
permission to export the product. So three big steps that
are enormously expensive. It is not uncommon for this to
cost tens of millions of dollars in legal fees and
(10:24):
everything else to get these permits. So we eliminate the
first step you just as I said. You know, Rick
and I got together and we said, wait a minute,
you know anything about you know, how do you do
this in terms of an investment. It's not our money
that we're putting at risk, it's they're putting their own
money at risk in the free market. If they lose
their money, they lose their money. Why are we just
holding them up to getting these permits? So we eliminated
(10:47):
those kinds of things. It's a very common sense approach
to how you approach regulation, and it really did unleash
a lot of investment. We had a number of final
investment decisions and I went forward. During our first term,
we did a number of other things, but I guess
to sum it all up, the President gave us a
very direct war, use common sense before you propose these things,
(11:09):
and use common sense to see what you might be
able to undo. And as a result, in twenty nineteen,
we became a net energy exporter here in the United
States for the very first time in my lifetime. So
it became energy and dependent, if you will. In twenty nineteen,
you know.
Speaker 2 (11:24):
Which is obviously great, and you know, I would just
be doing It's wild that, you know, that wouldn't be
the goal all waste. There's talk about you look at
that in the developments in the United States. But you
also there's also been talk about bringing more of Venezuelan
oil back into the market to trendy easy when you
look at what President Trump's done with Maduro and now
(11:46):
we sort of have a more helping hand. I guess
you could say Venezuela controlling hand. I don't know, ever,
you know, and then looking ahead at what is potential
in Iran depending on how everything goes down there, what
does that mean for oil for the United States and
just for the world moving forward. If you can kind
(12:08):
of get Middle East under control, and then we also
have more control in Venezuela.
Speaker 1 (12:12):
Well, I mean you're limiting that choke point that we
talked about earlier in the Strait of Hormuz. So I mean
Venezuela is on the water obviously, so I mean they
have an oil that they producer. It is called heavy
sour crude. And fortunately many of the refiners here in
the US Gulf Coast are set up to refine exactly
that type of oil, and they did for many, many years.
So Petavesa, which is a national oil company in Venezuela,
(12:34):
was actually one of the better run oil companies in
the world up until the Shobas administration took it over
and literally ran it in the ground, and then Maduro
whatever was left of it, he ran, you know, he
ran into the ground. But it was a very well
run oil company and a lot of again, a lot
of our refiners are set up for that for that
type of oil. The larger point, though, is that because
(12:55):
it's available, that doesn't get stuck in these choke points.
You know, it reduces the rittis around the world, not
just the United States, but around the world that that
oil can become available, and I think that's the important
work that President Trump is doing. The other point I'll
make too is that right now, Maduro and Delsea Rodriguez
to some degree, but Maduro, because he was sanctioned, because
(13:16):
Padavesa was sanctioned, didn't really have a market for that oil,
with the exception of China. So they had to sell
that market at a discount, a pretty steep discount, about
ten to fifteen dollars barrel, and most of it was
going to China, much the same way that much of
the Iranian oil today is going to China at a
large discount. So it'll be important to see how bringing
(13:39):
Venezuela back online. Perhaps once this conflict is done in
the Middle East, if Iran chooses to return to civilized
society and their oil comes back on the market, it'll
be interesting to see how stable the world markets become
as a result of that. It'll also be interesting to
see how China deal with the loss of discounted oil.
(14:02):
Keep in mind, they're in export country. They rely on manufacturing,
they're heavily energy independent. If their energy costs go up
because they don't have access to this discounted oil, it'll
be interesting to see what happens to their inflation numbers,
and then, by extension, what happens to their positioning in
the world economy. So there's a lot going on. It's
a very very busy time, but it's also an exciting
(14:25):
time if these regimes go away and this energy comes
back to the world market. Got to take a quick
commercial break.
Speaker 2 (14:32):
If you like what you're hearing, please share on social
media or senate to your family and friends.
Speaker 1 (14:39):
This is a bit random.
Speaker 2 (14:40):
But when you look at our power grid and you
look at AI and data centers, how much pressure is
that putting on our power grid? Is that something to
be thinking about.
Speaker 1 (14:49):
Oh yeah, an enormous amount of pressure. And it's not
just data centers, it's the economic growth. It's a bit misleading.
Some of the press coverage I've seen or recently tends
to for at least that the addition of a data
center actually, you know, just linear, your progression puts that
amount of pressure on the grid. There's no question that
(15:09):
their energy intents. But more and more of these hyperscalers
and more and more of these data center developers are
putting generation behind the grid and they're willing to pay
for their own generation, and that's an important step forward.
But when you just look at the growth curves, they're
they're phenomenal. I mean, it's just amazing how much we're
talking about. I was just reviewing some data for some
(15:30):
work I'm going to do with Standford Business School this week,
and you know, we're going to move these are these
are metrics that no one really understands, but I'm going
to say them anyway. We're going to move from about
four hundred tarawahde hours worldwide to over one hundred tarratwade hours.
Just trust me, those are big numbers. But that difference
is the size of the economy of Japan. That's how
(15:51):
much energy they use in Japan. So the growth rate
in data centers over the course of the next six
years is the equivalent of adding the entire higher country
of Japan to the world energy market. That's how big
these things are.
Speaker 2 (16:05):
That's greaty, So how are we going to sustain that?
Speaker 1 (16:07):
Well? I think I think, you know, again back to
what President Trump was doing in the very first or
early parts of the term, our term. You know, he
was very interested at that time in nuclear power, and
he thought that that was an answer. And he was very,
very frustrated, candidly with our inability to build nuclear here
in the United States. And you know, as one of
the areas where he really pushed Rick and I and
(16:28):
he pushed the NRC. He said, you've got to figure
this out. He said, you know, it seems like France
builds one every month, and we can't build one except
for every thirty years, So what's going on here? And
he was exactly right. And you know, he also recognized
very early that we were dependent upon Russia for our
nuclear fuel cycle. We were as dependent on Russia as
a matter of fact, as Germany was for natural guests.
(16:50):
You know, Germany was buying natural gas from Russia for years,
and Mike Pompeio and I spent a lot of time
over there telling him, you're too dependent on Russia. What
turns out that we were very on Russia for for
nuclear fuel. So we started a program at due to
create what's called high SA l EU each a l
EU HALU, and what that is is a fuel source
(17:11):
for these very advanced to very small modular reactors. And
it's an exciting time in the nuclear business because if
these things are commercialized in the next two to three
to four five years, we can actually meet that demand
that I just talked about with regard to data centers
and some of the other things that we're seeing on
our electricity grid today.
Speaker 2 (17:29):
But you know, as we rely more on AI as
a society, we already know where power grid is.
Speaker 1 (17:34):
Susceptible to attack.
Speaker 2 (17:37):
So does that put us in a more vulnerable position?
Speaker 1 (17:40):
Yeah, of course, everyone's in a vulnerable position when you
think about cybersecurity, I mean, our lives have become so
dependent upon online services of one type or another that
you're almost by definition, exposing yourself every time you get
on your telephone. So everybody's vulnerable to some degree. What
I think we've done a fairly good job with regard
to the grid is cutting off the access to more
(18:04):
sensitive types of information that Iran or North Korea, Russia,
whoever it might be, I would have access to. And
I think today, with the adoption of AI and with
some of the with some of the developments around things
like quantum computing, we've been able to severely reduce the
cyber risks that we faced ten years ago. Quantum computing
(18:24):
in particular is very, very interesting, and I won't get
into the details, but when you're dealing with cubits and entanglement,
it may at some point in the future make cybersecurity
completely irrelevant because there's just no way to break the
encrypted data that goes over a quantum computer.
Speaker 2 (18:44):
I'm realizing there's a lot I still need to.
Speaker 1 (18:45):
Learn from before we go.
Speaker 2 (18:51):
Is there anything else you'd like to leave us with?
Speaker 1 (18:54):
Just the simple fact that I'm excited. I mean, we
all our hearts all go out to the men and
women who serve in the military and have to defend
us each and every day, and who are fighting the
conflict that we see in the Middle East. The fact
of the matter is is that once this is over
and everybody comes home and the energy markets stabilize, we're
all going to realize that the work that we've all
done over the course of the last two decades or
(19:15):
so to make America more energy dependent is really going
to pay enormous dividends over the course of the next
two decades. And that's exciting because as we think about
how our economy is going to be shaped by artificial intelligence,
all the technologies that are being developed, we hope that
they're built here because that means jobs, and it means
economic security for all Americans, and I'm excited about that.
Speaker 2 (19:35):
I want to thank you as Secretary, but you told
me to call you Dan, so I'm going to say Dan,
very very interesting. Learned a lot from you. I still
have a lot to learn with some of the last
parts of the conversation with AO. I really appreciate you
making the time, sir, well.
Speaker 1 (19:51):
Thanks for having me. It's been fun.
Speaker 2 (19:53):
Those Former Energy Secretary Dan Burretts appreciate him for making
the time to come on the show. Appreciate you guys
at home for listening every Tuesday and Thursday, but you
can listen throughout the week. I also wanted to thank John, Cassie,
and my producer for putting the show together.
Speaker 1 (20:04):
Until next time.
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Clay Travis
Buck Sexton
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