Title: Jeff Currie (Carlyle) — $83 Crack Spreads & Why Canadian Oil Became Valuable Show: The Trevor Rose Podcast (host Trevor Rose) Guest: Jeff Currie (special adviser, Carlyle Group; co-founder & non-executive director, 1947 Oil & Gas; executive co-chairman, Abaxx Markets; ex-Goldman Sachs global head of commodities research) Date: 2026-08-20 (published; recorded 2026-08-13 — "as of August 13th, 2026") URL: https://youtu.be/UEgtrLten3c Length: ~55 min Note: fillers (um/uh/you know/I mean) and stutters removed; wording otherwise verbatim. Timestamps preserved. Auto-transcript garbles corrected: "Carl Group"→Carlyle Group; "Curry"/"Korea"→Currie; "Zelner"→Zellner; "Freriedman"→Friedman; "maralian"→Marshallian; "Famma"→Fama; "hedgeimmony"→hegemony; "go for one"/"Gal 41"→Gulf War I; "Arjent Merty"→Arjun Murti; "range of the old economy"→revenge of the old economy; "bricks"→BRICS; "delobalization"/"degalization"→deglobalization; "SDR"→SPR; "Bretonwoods"→Bretton Woods; "seal lanes"→sea lanes; "Bakra"→Malacca (probable); "Scott Basset"→Scott Bessent; "Swiss Frank"→Swiss franc; "gamecher"→game changer; "quad map buy"→"Claude meant by"; "JD Feeller"→JD Rockefeller; "talis"→Talos; "bore"/"boar"→Borr (Borr Drilling); "foreign change"→four and change; "bues"→boe; "offake"→offtake; "mindbggled"→mind-boggled; "Russ Leafon"→Ras Laffan; "share buy box"→share buybacks; "US shells"→US shale; "permapable"→perma-bull; "pressure space"→precious space; "candida"→Canada; "Adam's bit"→atom-bit; "ABX Markets"→Abaxx Markets. Left as spoken (not confidently identifiable): "Robert P" 07:43, "the TACO belief" 29:28, "that's where Europe prompt driver" 19:47, and the closing "Great, Robert" (the host is Trevor Rose).
00:00 Good afternoon, Mr. Jeff Currie. Thank you very much for doing this. I know your time is valuable, but I really appreciate it. >> Yeah, it's a pleasure to be here, Trevor. >> For the listener, among other things, you are a special adviser at Carlyle Group, you're co-founder and non-executive director of 1947 Oil & Gas, executive co-chairman of Abaxx Markets, but before that, you spent 27 years at Goldman Sachs, where you rose to become the head of commodities research and a partner, if I'm correct.
00:28 Yeah, >> that is correct. Lots of there. >> How would you define yourself nowadays though? >> Nowadays I like to think of myself as more of an independent thinker and investor with a little bit more freedom than what I had previously. So more of an unplugged version of Jeff these days. You also won the Zellner thesis award for your PhD at the University of Chicago where your dissertation was on the geographic extent of the US petroleum market.
01:02 So you've been doing extensive research for quite some time. >> Yes, actually it's interesting how I came up about that topic. I was looking at the geographic extent of the market was typically using egg markets. A market in Portland, Maine couldn't be integrated with one in Portland, Oregon, cuz the eggs would break as you moved them.
01:29 And then I actually went out on the market and it was in December of 1990, middle of Gulf War I, and we had a big war going on in Iraq, similar to now, but oil prices at $40 back then was like a recessionary level. So gravitated into what was hiring at the time, which was oil companies, and had all the data then, rethink this idea the geographic extent of the market not using eggs but using oil, and the rest was history.
02:02 If I'm correct you were born in Reno, grew up in Oregon, did your undergrad at Pepperdine, then you ended up at the University of Chicago. So what motivated you to make the move out east and how did you end up there? Oh, I'm very much of the free market liberal thinking, the tame libertarian thinking of — it was Stigler and Friedman and Becker, and I had the privilege to study under many of the greats, and so it really did shape my thinking. And they
02:37 say that Chicago and Goldman are cults and there's a lot of truth to that, because it's really about a certain way of thinking. >> Did you always want to work in commodities and investing? >> No. What attracted me to be doing economics is price theory. I love to think about price formation, because it's one of the single sufficient statistics that brings in so much information across the broader economy.
03:09 It's the true democracy of markets. Everybody has their opinion that's going to be represented inside that price. And so I was always fascinated from the beginning of price formation. And most of, you look at the Marshallian supply and demand curves, they were all done with agriculture markets and commodities.
03:29 So the commodity markets have a rich history in terms of thinking about price formation. If I'm correct, Eugene Fama was teaching at the University of Chicago while you were there and his main theory was the efficient markets, which was kind of contrary to what you ended up doing as a career. Did you realize that at the time? How did you think about that? The finance department and the economics department were close in certain ways but very far away in others. And when we think that
04:04 when we thought about markets, it was more about the tradeoffs and it was very different from finance. And it didn't matter if it was a market for eggs or a market for oil or marriage markets between males and females. The question was how does that process take place in that discovery? And I think the one thing they really emphasized on is think about this more in a broad sense than only thinking about it in terms of economic markets like the way we think about, or finance, but think about it in
04:41 terms of two people coming into a negotiation. And the one thing I learned about from all of that: it's the marginal conditions that matter. Like in oil, I don't care about the cost structure of the vast majority of producers. All they care about is right at that margin and that's where all the action takes place. And so those decision processes and those marginal conditions were really what the focus was on.
05:04 >> One way to view it is that the markets are efficient most of the time. Did you find it valuable to start there from an intellectual perspective, that the markets have a lot of wisdom in them? >> Yeah. No, I think there is, it's definitely something from which, again it goes back to that whole idea, the law of large numbers.
05:22 The more participants you have, you're going to have more information in there. But our emphasis was more on that decision making process and those marginal tradeoffs at the micro level than it is at the finance level, which is more macro. In fact, I'd argue one of the biggest issues that I ran into on Wall Street really is this idea: macro guys are average guys, micro guys are marginal guys.
05:50 And there's a lot more different information content found at the margin than there is at the average. >> You joined Goldman in approximately 1996 after teaching at the University of Chicago. Do you remember the moment you got the job offer and decided to take it? >> Oh, yeah. I was on my way to academia. I had no intention of going into Wall Street, but I remember it was in December of 95.
06:15 There was a very big cold storm and it went through Manhattan, very, very cold. And I remember I was on that trading floor in January of 96. Natural gas prices were exploding. And I go, this is how markets get made and the price formation occurs, and I never looked back. It was a very exciting opportunity and now that I look back and understand it, it was a very important time in the history of markets because you had deregulation going on in commodities, you had technology which was web 1.0, call
06:53 it HTML. Basically I think of web being in three technologies: the read it or write it and own it. And the read it was HTML in the late 90s right when we joined. And so you had technology combined with regulatory shifts and it created a liquidity explosion.
07:20 It took Goldman all the way to the heights of where it peaked out somewhere around 10 or 11, and that liquidity explosion lasted over a decade. And I was lucky enough to participate in that. And in fact, you look at what happened around when I came out of school was Gulf War I.
07:43 And if you think about what Gulf War I was, it was, and I'm borrowing this from Robert P, who I think is really spot on. Gulf War I was collapse of the Soviet Union and then a huge victory, a resounding victory by the United States in Iraq. They went there with 10,000 body bags, used 147. They went there scared and they dominated. The world was wow.
08:06 That's when the hegemony of the United States started and globalization started. And then the deregulation happened and then I was sitting there in Goldman and it was just boom, that explosion in liquidity with China, what was going on the emerging markets. It was an absolutely fascinating time. But we're at one of those moments today as you think about the other side of that bookend: United States is now in a really difficult situation in Iran and you have the resurgence of China. It's almost the exact two
08:36 bookends of the career that I experienced there at Goldman. If you're going to look back on your career at Goldman over the 27 years, was there a particular stretch that stands out as your favorite, either intellectually or just your own enjoyment? >> Yeah, actually all of it was, you learned something every day. You went in really excited.
09:00 You're, by the way, I still wake up today, you're always going to learn something new every day. But the growth of it, and I didn't realize it at the time. I remember now I look back, I remember one time I was talking to one of our analysts: yeah, copper demand's up 96% year-over-year. But you did not internalize at the time how big it was in terms of the expansion of the world.
09:28 Because in 1995, when they talk about energy they were still using oxen to do stuff. The world hadn't used, I like to call it artificial muscle, which is like tractors and trucks and everything like that, that was really taking place in those late 90s and the 2000s.
09:52 And that expansion, that growth was phenomenal. And I look back, now you'll never see a repeat of that because it was done and over with, but it was just an absolutely amazing experience. This podcast episode is powered by ATB Capital Markets. ATB Capital Markets provides financial solutions and strategic advisory services to help businesses thrive.
10:14 With a track record of successful deal execution, ATB is a full-service investment dealer with a deep understanding and commitment to the industries it serves. Visit atbcmarkets.com for more information. For context to the listener, that was a time when I guess you could say globalization was really taking off and commodities were booming as a result. Mhm.
10:39 Yeah, it was, I like to use that term HALO, hard assets local operations, is what we're going into today. Then it was the opposite: hard assets global operations. You basically centralized everything in China and the growth rates in China were absolutely phenomenal during that time period, and it wasn't just China, it was India and the rest of them. So I think commodities sat at the center.
11:10 By the way, I really look at the whole history of these time periods. It's basically tech and energy. And you were going through what I like to call an atom super cycle. The 2010s were a bit super cycle, technology, and now we're in an atom-bit super cycle because you've got the technology guys putting steel in the ground.
11:34 But I think your point here is commodities were at the center of that because the growth rates were just so phenomenal. >> Again for context to the listener, through the years you made a bunch of accurate commodity calls, starting with the revenge of the old economy. So 2004 your super spike call along with your colleague Mr.
11:55 Arjun Murti; 2008 when oil went to about 140 bucks; you called the gold collapse April 2013; October 2020, you called the new commodity super cycle, which roughly takes us today, as of August 13th, 2026. One of your most recent comments was the record crack spreads and refined products distress. So for the listener, today crack spreads are about $60 a barrel.
12:19 What is that telling you in terms of demand for oil and what is that telling you? It's not being driven by the demand for oil but it's being driven by lack of investment and bottlenecks, and the bottlenecks are shifting. The one going on right now last week was copper. This week it's probably going to be gold.
12:44 So we're seeing the rotation of these bottlenecks and it's having a significant impact on things. But I think the key underlying issue, and we coined the term in 2002, the revenge of the old economy. We put too much capital to work in the new economy or technology in the '90s and early 2000s.
13:05 So that by the time the 2000s started, we were underinvested. And it's the exact same dynamic playing out here. Now the demand drivers are different. In the 2000s, it was China and the BRICS. This time around, it's being driven by deglobalization: whether it's military buildout, duplication of redundancy in supply chains, more manufacturing, you have electrification of the world, then you have what I'd call redistribution that leads to too much debt and debasement. So it's a similar type of
13:41 story in this context of tech in the investment, but the demand drivers are very, very different. The one in the 2000s when it was the BRICS becoming urbanized, it was like wow, the horizons, it's super exciting. This is not fun kind of demand drivers this time around. >> But specifically refined products I think you've emphasized matter quite a bit, so why do you focus on that part of the commodity more than others maybe? >> Who consumes oil, that's the thing. In fact I have to say I don't understand why there's this
14:16 obsession with the price of oil. Does it matter? Nobody consumes it. I don't know if we're out of refining capacity or not. If you think about just how much damage has been done to Russian refineries, you have refineries behind the straits that lock down, you have China that idled their refineries to deal with the shortages in crude and just created a bigger shortage in products, and people sit around scratching their head.
14:42 Well, why is oil not, it's at 88, whatever, 88 or 89 today. No, it hasn't done anything. Guys, look at product prices. They're sitting near all-time highs right now. So to say that this is not an issue, and the vast majority of people talking about this, they don't have any exposure to oil, only refineries do. So that's part of the reason I focus on that. But copper's been a big mover as well. I think gold is the one you've got to focus on right here right now. But I think
15:15 the way I like to say it is the bottleneck changes and rotates across these different markets, but the trend is the same. And it was crude oil itself back in let's say March and April, and then it turned into products, and now it's copper. Today, gold and silver.
15:35 I bet silver is probably the one that's going to rip in this next spike. And everybody goes, "Oh, Currie's wrong. He's right. He's wrong." Because it goes like this. It's not a continuous upward trend, but rather it is a sequence of spikes and rotating. And the way these commodity investments work, you're banking those spikes.
15:55 And when you look at commodities, since we made that super cycle call in October 2020, they've been the best performing asset class out there, even better than crypto. It's like cocoa the other day was a fifth largest move on record. So you have a super El Niño where they call, plus the Ukrainians taking out grain shipping in places like the Black Sea.
16:22 These markets, you're facing real significant shortages and so I don't want to focus on one in particular. It's just a sequence of outages. And when we think about the energy and why somebody's "oh oil's only 88" — I don't care where the bottleneck is. The magnitude of this shock, it was almost like, okay, you guys weren't bullish.
16:44 We took out the Straits of Hormuz. You weren't bullish. Okay, let's take out Black Sea. Oh, you're not bullish. Let's take out the Russian refining capacity. You're still not bullish. Let's take out the Red Sea. I mean, my god. The magnitude of the shock is unprecedented.
17:05 And by the way, it's grains too. It's petrochemicals, it's fertilizers. And the level of complacency is the part that probably surprises me the most. And I think it was just this weird obsession with the price of oil. But just look around you. Corn, big move yesterday in corn as well. Some smart investors were calling for a price spike through the summer as a result of the strait news closing and that didn't necessarily happen.
17:36 Oil didn't get to 200 over the summer. We're just over $80 today. So did that surprise you or was that kind of what you were thinking too? Maybe not a spike, but just strengthened oil prices overall. Once I saw that the Ukrainians were going deep into Russia and you have the Chinese throttling back there. Yeah.
17:53 The question is, is it all going to occur in products or is it going to materialize in oil? Again, I go back to that point. Those guys were right: look at the product prices. So it's again just there's this obsession with crude oil. Again, I want to emphasize nobody consumes crude oil.
18:16 >> Consume products, >> right? And if you look at the gross product value of like a 321 crack spread, but just so it's one third diesel, two thirds gasoline. They're sitting near all-time highs right now, >> right? Do you think that shows up in the price of WTI eventually? How do you think about that? >> I do because I think ultimately they're going to be enough refineries to chase this. But right now they can't be.
18:47 Why would I go back to your point? We're trading 60 plus dollars. I think there was a day or two like a week or two ago we were $83 on that crack spread, more than the price of crude. That tells you there's not enough refineries out there. But more likely than not, you have the teapot refineries in China now chasing the margins.
19:07 But then again, the question, the Americans told the Russians to stop it. Hey, you keep taking this stuff out, it's going to be really hard to recover from. On the other hand, some people would say that that's the point of strategic petroleum reserves and inventory buildups, is for moments just like this and that's, we'll replenish them once things get back to normal.
19:26 How are you thinking about that? >> Well, there's no strategic reserves for a lot of these commodities that are being hit right now. The SPR is built for the United States: go into US refineries and create product if you had a shortage when the US was short oil. And by the way, the US is still short oil.
19:47 If it didn't have Canada in there, that's where Europe prompt driver. United States would be, it's energy dominance. It's dominant natural gas, but it's not so dominant in oil. It needs Canada to be dominant. But I think the key message here globally, you don't make refineries on a global basis. So there's a lot of question and you look at the slowdown since the Russians really went into, or excuse me, the Ukrainians went into Russia, the SPR draws and things of that nature have slowed down
20:22 tremendously. So you go into the winter months in Europe, the question is, is there going to be sufficient diesel? Now, diesel is the one that we're really short right now. This episode is brought to you by Bunch Projects.
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21:05 Bunch construction-led engineering is built on trusted partnerships and proven performance. Learn more at bunch.ca. So for the listener, despite not seeing a price spike this summer in terms of WTI prices, crude oil refineries are in short supply. The refined product is short these days.
21:27 And maybe that may be a better indicator for prices going forward. It's a slow leg. >> Yeah. You look at the value of the refineries, they're extremely well bid right now, like the margins. So yeah, I think when I was at Goldman, the one thing we'd always recommend is buy the petroleum indices.
21:48 Don't try to pick crude oil, diesel, gasoline. Just own the whole basket. In case of you guys want to do the equity side, own some refiners, own some producers. Why not like the integrated oils? You get a little bit of both. Do you think it's a structural shift with the change in the Middle East now or is this temporary? >> This is structural.
22:07 This is one of the biggest things. Here's the way I like to think about how profound is it. Let's go back to the thing I started with between 91 and today, it's the end of globalization. But let's go back to Bretton Woods 1945. Bretton Woods is a town up in New Hampshire, and it was where the United States met with the rest of the Allies and planned out how they were going to divvy up the world.
22:36 And it was something that nobody had ever done before. They basically looked at the world and go, "Hey, we're going to give you money." That's what the World Bank did. European Development Bank or what it was called, right? Give you loans, give you money.
22:52 You're going to rebuild yourself. US had like 95% of the industrial output and in exchange for that you're going to use the US dollar and we're going to use our big navy and we're going to patrol the world sea lanes and let you guys trade and move everything around. And that was Bretton Woods. And what was that grand bargain? That grand bargain was the United States was going to keep sea lanes open. And let's also remember that that Navy the US had at the end of that second world war was inherited from the British, and the British inherited it
23:28 from the Spanish. Take Malacca. The Portuguese found it in 1602. The west has controlled Malacca since 1602. Diego Garcia, again Spanish and the Portuguese found it. It's those ports. The ships may have changed, from being big wooden sailing vessels to being destroyers and aircraft carriers and everything today, but it was that network of ports that really mattered.
23:58 And it's been in the west for 400 years. And so when we think about if the US loses the Straits of Hormuz, this is a game changer on epic proportions. Because one, it's not only the end of globalization, it's the end of Bretton Woods. And let's think about the cost, and I made this point on another podcast and I saw the, oh Currie, they don't get this. Let me try to explain.
24:22 You lose the exorbitant privilege, the cost of funding in the United States is going to go up. Why is Scott Bessent fighting the yen and everything like that as he possibly can? And by the way, the linkage: oil goes to Japan. Biggest short in the world. Yen was the cheapest currency in the world.
24:41 They borrowed in yen and put money into US assets. Why is he fighting this? Because all that yen comes out of the US, interest rates go up. All of this is tied. And when we think about if they lose the straits and then okay let's think about I'm moving copper between Chile and Shanghai, and that's China and Chile.
25:09 US is still polices that Pacific. That's the reason why it's pirate free and everything. US spends a lot of money on this. >> Yeah. >> And so if US now breaks that grand bargain, the dollar no longer is dominant. This starts to raise the cost of funding to the Americans. And this is the example I gave. Nobody seemed to get it, so I'm going to try it.
25:28 But I think it's important. I was looking at funding costs in Switzerland recently. If you want to get a mortgage in Switzerland right now, you can get a 30-year fixed mortgage for like 50 basis points. Why? Swiss franc is good as gold. Everybody's trying to buy Swiss francs right now,
25:48 because it's a safe place to put your money and that drives us. All the dollars and in capital sits inside Switzerland and you can get loans really cheap. Now let's think about that from an American perspective. If everybody's demanding your currency because they need to trade in it, your funding costs go down. The United States has a 7% fiscal deficit right now.
26:09 So if you lose this, this is huge. This is not just a simple walk in the park. I was asking Claude the other day. I go, what's, if the US loses it, is it the biggest naval loss ever? Yeah, absolutely. Number two was when the Europeans lost the Suez Canal in 1956.
26:28 So here we are, what is that, 70 years later and the US has the potential to lose the straits. And this goes back again, and by the way my view is what they want, the Iranians want the photo op of those destroyers leaving the straits. I don't know, you're not as old as me, but I know you've seen the picture, remember that helicopter going on top of Saigon and pulling those trapped people in the embassy off the top of the embassy? It's ingrained in your head.
26:59 That's what Nixon's remembered by. And that's what the Iranians are trying to do. So yeah, this is I think a much bigger game than, or bigger implications for growth, financing, oil, everything. And we'll see what happens. But this is the plan, I could say.
27:21 What are the Americans going to ask the Iranians for permission to bring the USS Abraham Lincoln into Bahrain? That's not a superpower. So how long is this going to go on? What's the endgame here? If America wants to be a superpower, there is only one endgame. It has to take control of that strait. Do you think that the US has been reluctant to take it over or back or however you want to phrase it because of the political capital it would have to spend on lives perhaps? And why doesn't the US just take it back tomorrow? It
27:53 definitely has the power to do it. >> From what I read, it would be bloody. Really, really, really bloody. Because you're going to have to think about this. What do you need to control it? All you need is a guy sitting up there with a rocket launcher. Now they have drones. People go, "Why is this different than the tanker wars in the '80s?" No, you've got drones.
28:14 They just go in and take anything out. And by the way, these guys now have the accuracy with hypersonic missiles. So they've got Russian and Chinese. Another way you can think about it, this is BRICS versus G7, and the G7 is asleep at the wheel. And the BRICS are going, "You guys have abused us for the last 400 years. We're done with it."
28:34 And so it's one of these, I think it's huge, but the ability for the Americans to go in and take this: for one, they've been burning through those interceptor missiles sitting out what, 150 miles away, going ching ching ching in there. No, the reality is at this point in the ball game, they should be flying F-15s, F-35s in there and dropping gravity bombs.
28:58 They don't want to lose the airframes. They don't want to lose the pilots. And I'm not saying this anything, I seriously agree, I wouldn't want to lose anybody in this, but the reality is it's that type of a conflict. And then the question is from an oil perspective, and you probably heard about the $300 billion plane that's going and taking gold bars between the Emirates and Iran, do the Emirates want to get hit? Do the Qataris want to get hit? There's
29:28 a, this is not an easy question. And then from a perspective of the oil market, I think the reason why people think it's normal, it's so catastrophic there's no way it's going to happen where you're going to see one of them take out one of these big energy facilities, and so we just wait and it'll go away. And that's part of the reason why I think we're sitting at these lower price levels and not panicked: people look at it and go it's so bad they're not going to do it. But then again the TACO belief is
29:56 United States has done as a superpower, because they're going to push them and go, all right, what they're doing right now is they're trying to push them out. And this ties back to commodities and oil in particular. And one way you phrased it is the buffers are gone and abundance is an illusion, in the sense that there isn't as much room for error in the commodities and oil prices because of the strait.
30:22 >> Yeah. No, there isn't. The abundance illusion was, let's go back to Carter. Carter has this very famous speech, it's called the sweater speech. It's like February 1977, he gets on TV and he has this cardigan sweater he puts on, and you can see in the background there's like a thermostat in the back, he turned it down, he goes you guys have got to put, it's really cold, we have an energy crisis going down. The moral of the story was never admit to the scarcity, cuz what do you think happened
30:54 the next day? Panic struck. Oh god, we have an energy crisis. Don't ever admit to it. Create the illusion of abundance. And from George W. H. Bush or senior, from that point forward you saw the use of the SPR in lots of language to talk the market down. And it was Gulf War I when he did it,
31:22 first time they used the SPR because it was built up in the '80s, and every president since Bush senior has done the same strategy. So what Trump's doing is no different. The difference with Trump is can he last this thing out. >> Yeah. >> And all the other presidents were able to last it.
31:44 Difference this time around is this is a lot more, the technology is very different. I mean what are we learning from this? I like to call the old war kit artificial muscle. That was oil. Trucks, planes, trains, aircraft carriers, all that stuff. Artificial muscle is not doing too well against artificial intelligence, which is like AI and drones and things of that nature.
32:05 They can pinpoint accuracy. It's like the quality of the weapons that the Iranians use there, they're not that sophisticated, but their accuracy is astounding. And that's where it's a lot different. So it's a very different ball game this time around, and the investment implications and capital rotations.
32:29 One way we described it is rotation into high free cash flow yield old economy assets and the HALO trade I think is how you phrased it. Mhm. Yeah. If we look at history, it's just a rotation between energy and tech, because these have to be the two most important industries in an economy. If you can't turn the lights on, nothing happens.
32:56 If you don't innovate, you'll never progress. So it has to be those two that are the bottlenecks, and they typically have always been. You look at the Exxon, look back over the last 50, 60, actually 60 plus years, and actually let's go back 100 years, the energy guys were always the biggest companies in the world, and then the tech guys, it started with IBM, Microsoft, Nvidia. Those are just a rotation between the commodity guys and the tech guys. And you think about those are the two barbells of the
33:32 economy. And so when we think about these rotations, I've lived through two of them. One was in 2001 and 2002, we left the dot-com world and went into that commodity super cycle. It was violent, brutal, violent. The other one I lived in, and Trevor, you're probably old enough to live in that one, was 2014, 2015, 2016.
34:00 When we left the commodity world and went into the tech world, absolutely violent, brutal. You couldn't give Microsoft away. You couldn't give tech away. People didn't want, all they wanted was commodities. And then you hit a point of saturation. And by the way, I remember there's a period in there in late 14 and 15.
34:21 We were going down $6 a day and all the markets were repricing. And I want to go over an important point here. Everybody goes, "Oh, Currie, oil can't go to whatever, $300 a barrel, whatever." I want to make this point: everything reprices. Let's go back to 2000 versus 2006. In 2000, the price of oil was 20, rates of return the companies were earning were in the mid-20s, 25% IRR type stuff.
34:48 By 2006 and 7 we're at 60 plus dollars a barrel. So 3x on the oil price, returns were lower. And the reason why is everything was repricing. Costs were going up. Money going up. Everything repriced. And I want to make this other point and really you think about this one hard. Just bring it back home.
35:10 Actually, I was sitting in Calgary at the time of the point looking at this, it was a private equity pitchbook of an asset in Calgary. It was priced at roughly $110 a barrel deck and this was like 2012, 2013. The IRR on that upstream asset was somewhere around 25% at the time. And the reason I know is back then we were looking at the everything again.
35:40 I go, let me look at this again. Now it's 2016 and price of oil is at 40. So it was roughly 120 to 40. So let's say it went down 2/3, 66%. So what do you think the return on that asset was then? Most people would go, "Oh, it's negative. Terrible." No, it's about 17%. Why? Everything repriced.
36:06 Remember steel did, copper did, Canadian, think about the Canadian dollar. You lived through that thing. What's the move in that Canadian dollar is what, 60%? That's like the cost of labor. Capital cost, labor cost, steel costs, all of it. Food cost, fertilizer cost, all of it repriced. And so you look at it, it didn't really feel that different.
36:31 By the way, the moral of the story is who got killed? It was those companies like Chesapeake who own the physical, the land, >> which by the way, probably the same thing with these guys and the AI guys, the guys who own the land are going to get in trouble because they can't handle the repricing.
36:51 >> So you basically don't want to hold on anything when you go through these things. You'll live through it if you let it reprice. But that's what happens. So when they go, "Oh, Currie can't happen." Well, it happens over and over in history, up, down, everywhere, all around.
37:05 And you ask me, is oil that really that weird? No, cuz all the money is sitting in AI right now. And what happens when that money leaves AI? It goes to oil. Then the sand can reprice. >> Speaking of some money at least leaving tech to go to oil, you are literally putting your opinions into investment. You have recently became a co-founder of 1947 Oil & Gas.
37:32 So maybe for the listener, how come you decided to co-found an oil company now and what's the value proposition for the company going forward? >> What I really liked about it was oil is the cheapest thing on your screen. This was up until February, it was the cheapest thing on your screen.
37:54 And inside oil, shallow water is the cheapest asset inside oil. People just don't want it, don't like it. I mean, the amount that we pay for these assets in that part of the world, like $4 a barrel on these reserves. And the flow rates are incredibly low. Somebody wrote a research report, they titled it "Shallow Water, Deep Value." I love that title.
38:19 It says almost everything you need to know. It was forgotten. And it's like we're going to IPO in a few weeks now and we're going to be paying a 5% dividend, which I think is a real testament to the value in these assets.
38:39 But the idea is we're going to roll it up. And Tim Duncan, who is our CEO, he did it at Talos. He knows the area incredibly well. So I think it's a really exciting opportunity and invite the listeners to look into it. I think it's going to be a great opportunity. It's the right location.
38:57 And by the way, it's the right time to want to be owning oil in North America. You've got whether it's in Canada in Calgary, but the shallow water, the reason why I'm focused on is the cheapest thing on your screen. The investment thesis might be phrased as a belief in the chronic underinvestment into oil and picking up cheap assets to take advantage of going forward.
39:22 >> By the way, on that here's another point about the dividend. In fact, I was at this dinner the other night and I was asking a guy, I like asking Claude a lot of questions. I asked him who's richer, wealthier, Elon Musk or JD Rockefeller. You know what his answer was? He goes, as a share of GDP they're about the same.
39:42 However, Rockefeller was a different kind of rich. What did he mean by that? Cash. I like to point where all these tech guys go to get cash. They go to the Middle East. Oil and commodities create cash. In an environment now where you need cash and want cash, you want to own these kind of assets because again, it's a dividend with what it pays you.
40:04 So I look at the world in an environment today, having access to something that's going to give you short duration cash is a unique investment. Now, the question is, can all these tech guys ever get out and get cash out of these positions, and that's what Claude meant by a different kind of rich, because they're rich on paper.
40:26 But JD Rockefeller, because oil, commodities, the thing that what they do is they print cash. By the way, investing in the asset that produces the commodity really long life, but once you have it, like you say, or the Saudis in the Middle East, you have something that generates real cash flow, which in this day and age seems to have been forgotten in the value of it.
40:48 The 1947 is in the midst of completing the Renaissance acquisition. About 11 producing fields, 23 offshore platforms, 88 active wells. Production's about 3,000 boe a day. Do you view that as a starter kit to roll up more assets in the area? How are you thinking about that? >> Absolutely.
41:05 And we expect to get that up into four and change rather quickly because also people have not been putting money to work in that space. It started in COVID when they shut down. They just quit investing. So it's a relatively minimal amount of work to get a huge bump in production. That gives you the base and the cash flow to roll up more assets in the space.
41:27 And we already have some ones in target that we're going to be going after. >> Shallow, without giving away your secret, shallow deep Gulf or Gulf Coast production is where you've been targeting because the idea is that not much money has gone into the region I think. >> Yeah. >> Do you view other jurisdictions with opportunity? Are you looking around the states? Maybe up into Canada. How are you thinking about Canada?
41:48 I think with Canada the issue that's really come to the forefront is transportation. That's the only thing. I'm a big fan of the Canadian asset base. The question is can you get out? I think one thing that all of this has done, and especially with Trump rattling the cage with the Canadians over tariffs, it sure will speed up that process with First Nations, and right now the expectations are you guys are going to have a million barrels per day of extra oil on water, whether it's going
42:19 out to Vancouver or going out into the Atlantic. The point being is these dynamics are changing, and I remember you go back 10, 15 years ago the joke was what's the one country that has one commodity with one customer? Oh it's Canada. Well that's no longer the case anymore.
42:45 And I think, actually somebody made a point to me, Trump was a great unifier of the world. The fact of the matter that these pipelines are now being built and really discussed now is a really big difference from the Canada that when I was at Goldman back in the late 2000s and early 2010, that would have been unthinkable. But I think that's really the defining difference for Canada.
43:07 And you are maybe in the circle of large capital providers, and so do you view the messages from Canada as being serious and that maybe something will get built, or how do you view those messages coming from the country? Very serious. Everybody in the world is now focused on themselves because they realize they can't depend upon others, and that's the world that globalization was: they had to trust the Americans to
43:40 be able to provide all those commodities to them. Now in this world of fragmentation, trade wars, lack of free trade, supporting different industries over other industries, I think the one thing we're seeing, again this is what deglobalization is all about, is being focused on making sure your citizens and your people are taken care of and not dependent upon others.
44:08 And we're seeing that everywhere in the world. And I think with Canada in particular that having the access and freedom of markets is going to be essential there. >> And so again, not to give away your secrets, you're looking around in the markets for 1947 and your assets, but from a geological perspective, is the Gulf your focus? >> Yeah.
44:32 When we look at the shallow water, Tim, our CEO, he's an absolute expert in the Gulf. So that's going to be the primary focus. But we look at these assets and anything shallow water. I'm also on the board of Borr. I'm a big believer of Borr. Again, it's the highest quality rigs, these shallow water rigs, they're going to produce those marginal barrels whether it's in the Middle East, or in the Gulf of America, places in Asia. So I think
45:04 the shallow water opportunity is going to be huge not only in the US but obviously in places like the Gulf. In fact right now those areas are under constraint but ultimately you're going to build pipelines, because that is where your marginal barrel is going to come out of, is these shallow water opportunities. >> And so offtake, is an agreement for the assets that you guys have or applying to drill? >> The offtake for most of the offtake
45:40 is just going into refineries in places like the US Gulf Coast and things of that nature. It's not that big of a question in that part of the world because remember it's got extensive infrastructure. So the number of miles associated in pipe that are associated with these assets, you'd be mind-boggled when you start to look at it, because it's a history of deep investment in pipes.
46:07 I think it's 250 miles of pipe that are associated with 1947. Just put it in perspective. >> Some companies have taken a strict return of capital framework with dividends and buybacks to give money back to shareholders the last handful of years. Others have had a flexible schedule. Some companies are doing 100% growth.
46:28 How do you view the company going forward? How are you viewing that? Given the fact that we're buying assets in a mature basin like that, we're on that flat tail on the back end of the decline curve. It's really about providing cash and dividends and returns to investors.
46:51 Right now I like to say growth is a dirty little four-letter word for most of the people in the, and by the way it will remain that way until finally we roll off the edge. And by the way, that's why I tell, I was at this event with the tech guys, growth is just a different, you look at these tech guys.
47:12 By the way, they're most likely going to be just like, I remember I was at the LME dinner in 2013, actually it's 2014, after commodities went there, and I go guys you realize there's out of 13 companies in this thing there's only one management team that's still the same from 2012. >> Right. >> And so growth comes with an entirely new >> world, and my feeling is those tech guys that are spending now north of, because think, what did all those commodity guys do in 2013, 2014? They were spending 120% of cash flow. And so when you're
47:48 at 120% and the thing dies, it's game over. Then the new guys that came in, no, we will never do that again. We swear that we will never do it again. They come in and then finally prices scream in and then a new group will come in and they'll start spending. And I think the tech guys at 10 whatever percent, they're 20, like 12 in commodity land right now, they'll learn that world.
48:15 It's cyclical. Also, they're going to have to learn how to get much lower multiples, more like what the energy guys did. So this question about growth, we want to grow through adding rollups through acquisition, but we're also going to be very focused at paying investors the cash that they're demanding, because the investor base today, they don't want that world of 2012 and 2013. Yeah.
48:46 And so you asked the question on that is, when does that change? It changes when you roll off into a different environment, and I'm trying to think if you're asking that question when you move into a growth environment, I think it was somewhere around 06, 07. You got rid of, because in the late 90s people were still in the share buybacks, dividends, we don't spend money, and finally you don't spend enough and the price explodes but those guys don't know how
49:18 to change their behavior and a new group comes in. >> Some people have been commenting on the demise of US oil production, US shale falling off, but on the other hand US exports hit a record in May. US natural gas is basically at records too. So how do you view the US capacity for oil and gas? Is it short or be long? How are you thinking about that? With gas, there's going to be a period we're going to be short.
49:47 Given the fact that we haven't been drilling, counts remain relatively low. The returns haven't been that great. And you're investing tremendously to be able to supply the world with missing gas from everywhere now, not only Russia, but as well as from the Middle East with Ras Laffan, 20% of the world's LNG market out.
50:08 So there's lots of room for investment. So you got that demand pull to the rest of the world. We haven't been drilling. So it's going to create a tight environment over the next several years, but it doesn't mean in natural gas, oil you got a problem, but gas you don't. It's just easier to get the molecules out of the ground in gas than it is with oil.
50:30 Oil, whether you look at the point we hit 13 million barrels per day on the eve of COVID, what are we, 13.4, 13.5 right now. Whether we ever get to 14, I don't know. But that story is over with. That ship sailed. But gas, no, I'm comfortable in the gas story. >> Meanwhile, you have Canada up north, your friendly neighbor with a large gas tank, so to speak.
50:58 >> Yep. Yep. >> You called the super cycle 2004, 2008, but you're also known for calling the opposite side of the call. When shale came along, you killed that thesis and changed your mind. So fast forward to today, what would it take for you to change your mind on the commodity super cycle now? >> That's a great question.
51:19 Here's a way I'd answer it: commodities, the supply and demand in technology, the long-term supply and the technology, they're relatively predictable. Demand's a lot more bounces around and everything. So you can get these long run trends. Everybody say, "Oh, Currie, you're a perma-bull." No, I was a perma-bear before I was a perma-bull.
51:38 >> Exactly. >> And I was a perma-bear in the '90s. It's more where are you in those big structural thematics, because that's what you can predict. You're never going to predict the turns. I felt like I had a pretty good idea to get those turning points like that on that. We're definitely in this.
51:56 That's why I'll fight people going, "Oh, you're not getting 4 million barrel per day, swimming in a surplus." Because I don't know where you're going to find it. And by the way, I want to point out those people telling those big bear stories have been telling you that for over two years. It got a little bearish in fourth quarter of last year, but it was a little bit. It wasn't like we were swimming in it.
52:18 And I go, another back to the 4 million barrel per day surplus. What are you guys going to give it up? And so when we think about, and typically all these markets move together because the capital flows very similarly, it all goes back to that whole point you're asking, growth or dividends and buybacks, and they are in that capital preservation mode.
52:45 They'll be in there until the investors change their mind and go grow grow grow, and I don't know if they're going to change their mind and go grow grow. >> We'll see. >> Yeah. There hasn't been too much reaction, and even with the invasion and the strait, the US producers, Canadian producers aren't going crazy. >> Right. >> As we move towards the end, you are putting your money where your opinions are so to speak with 1947, but if you were to maybe give investors one or two bits of advice
53:18 in this summer/fall of 2026, what would you tell them to watch and how are you thinking about the markets? >> As soon as I'm off this call, I'm buying gold. That's why, I'm gold, silver, I think it's time. You feel the shift again in gold. For one, the fear of rate hikes kind of took the wind out of the sails of gold back in March.
53:44 I got short gold from March until around June. Been flat, and I think right now is the time to go into silver. Basically, you've moved about 7 to 8% so far in these. Gold could go to 10,000. I'm in that camp. Silver could go to 300 or something ridiculous like that. I got up to what, 120, 150 in that rally before, it's 63 today or 64 today.
54:08 So I think the precious space is something I'd really be focused on, and agriculture. It's just what the Ukrainians are doing to the Russians, and Russians are big suppliers. The yields in the US were quite disappointing last week. You have fertilizer problems, super El Niño.
54:33 I'd be looking at agriculture as well. Energy, I'm just long, so I'm not going to add anything at the margin on that. But the one I would want to get back to and I think is one to be focused on is the precious space. >> I really appreciate your time today. >> Great, Robert. Thanks for having me. Is quite enjoyable.