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24/7 Wall St. contributors Douglas A. McIntyre and Lee Jackson discuss what the future might look like for industries such as coal and oil, and whether or not they are buying or selling on stocks in these fields.
Transcript
[00:00:02] Doug McIntyre: Lee, those of us who follow the oil companies and just fossil fuels in general, often hear about something called peak oil. I’ve heard two meanings of that. One is when you hit a peak of supply, the other one is when you hit hit a a, a demand peak, right? So I’m gonna talk about the demand peak right now. People assume that within the next decade, renewables, particularly wind, solar, and nuclear, we’re going to take up enough generation of electricity that you wouldn’t need oil and coal, that they would shrink over time. Okay. The two big oil executives have said within the last month, “Are you kidding me? Peak oil. Are you kidding me?” 30, maybe 40 years from now.” And the guy who’s the head of Chevron said, “Are you kidding me? We keep producing oil because you guys keep asking for it.” He acted like it was a public service. But AI is everything now, isn’t it? You can’t talk about anything without AI. If you look at what is going to have to be the server center capacity to provide electricity just in the United States, forget any place else in the world. The number I heard yesterday was is if you take a large data center facility like the one that’s being built down–
[01:24:15] Lee Jackson: The ones being built now are so much bigger than preexisting ones.
[01:31:21] Doug McIntyre: You might need five nuclear reactors. Five to power a really, really large AI service center. It’s staggering. It makes my head explode. But what it means is this – solar is not gonna get online fast enough. Wind, the president has basically shot in the head. Nuclear is great, but there are two problems with it. One, it takes a long time to build a plant. The other one is, is that you can’t just waive your wand and approve ’em. The government’s, it’s very important to the government to regulate things that have to do with nuclear energy. So, I think when you look at oil stocks, you look at oil companies. To me, the, the chances that those companies continue to have increases in revenue, particularly if oil prices stay, you know, like 70 bucks a barrel. I think that those are long-term great investments. Two years ago, I would’ve said buy them because they’re shrinking. They’ll cut costs ahead of that. It’s a great, I don’t think that anymore. I think big oil companies and oil services companies are awesome.
[02:56:16] Lee Jackson: Wasn’t it Mark Twain said the rumors of my death have been greatly exaggerated, or whoever said that, and that they’ve said this about oil. You know, for the, for the whole time I’ve been in this business, which has been over 35 years. And the incredible thing is prices have held reasonably like here. Now again, I live in the south, so it’s cheaper here. Last time I paid was like $2.50 a gallon here, you know? And because we’re near the Gulf Coast and near all that, but. You’re exactly right, the cheapest way, and certainly will with these gigantic AI driven data centers is natural gas. We have more natural gas than anybody in the world. And you know, whether it comes out of the Permian or it comes out of Alaska, you know, that’s the only way they’re gonna be able to cover that demand isusing natural gas, and that alone will fuel the big integrateds for years. And they’re such good investments. Now again, they’re not as exciting and they maybe don’t go up as fast, but if you’re a long-term holder, Exxon, Chevron, the big boys are the place to be because they’re the ones with the CapEx to do what’s needed to change. And you’re right, the, you know. No, nobody’s gonna be selling their gas powered cars tomorrow.
[04:23:06] Doug McIntyre: Well also consider the fact that there’s a glut of natural gas right now. But once you start to get more AI server farms online, that glut is going to go away. The price of natural gas will be, two years from now, the price of natural gas will have hockey sticked.
[04:44:08] Lee Jackson: It’s what, three and some change now? It, it could be six or seven.
[04:49:02] Doug McIntyre: Very easily. So if you’re an investor, you look at companies that have large natural gas deposits, and you say to yourself, that company is going to be doing great in two years. They may have supply right now. And you say, yeah, I don’t like the company because they have lots of natural gas, but it’s, it’s priced too low. Believe me. Now is the time to look at those companies because natural gas is going to go up. There’s just not enough energy. Anywhere. Anywhere. Server farm, AI companies are gonna come to your house and ask if they can plug into your wall and pay you.
[05:34:07] Lee Jackson: No, you’re, you’re exactly right. And also for our friends and, and viewers remember. These companies all pay a very good dependable dividend. Exxon three and three quarters, Chevron, four and a quarter. I mean, and these, they never cut their dividend ever, you know, so I mean, if you have to wait it out, plus if, if you’re a savvy enough investor and know how to do this, you, you get your dividend. And you can sell covered out of the money, covered calls on it, that will, you know, and if they expire worthless, you keep the money. If they call you away, it’s gonna be considerably higher. So they’re just a good long-term investment for anybody. Whether, whether you were in your fifties or your thirties. Good idea to buy it now for that, exactly what you said, the AI push and natural gas use and how much will be used.
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