Wall Street’s Role in the Energy Transition

Guest

Arjun Murti

Partner, Veriten

Transcript

Arjun Murti [00:00:05] This is the most important topic in the world. How do we provide energy to improve our standard of living? That’s why we use energy as why we use fossil fuels. We have the least number of people in poverty in the world today. We’ve had rapid population growth because of better economic conditions. We now need to do that with as small of a climate environmental footprint as possible. And please, let’s not forget about biodiversity. Let’s include biodiversity. Let’s include clean air, clean water, along with decarbonization. It is entirely possible.

Jason Bordoff [00:00:35] The last year has reminded all of us that the energy transition, energy markets and geopolitics are inextricably linked. In the past half decade alone, extreme volatility in energy prices has created uncertainty for consumers and producers alike. For Wall Street in particular, an uncertain energy outlook poses important questions about risk and about strategy. Aligning energy investment with expected demand is a difficult proposition generally to say nothing of doing so in the midst of an energy transition that’s moving in fits and starts. And yet, effective investment is a vital ingredient for both energy security and for climate progress. How should investors address the tension between energy and climate needs? What do the coming years hold for oil and gas markets? And is the term energy transition even the right one? This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Today on the show Arjun Murti. Arjun has spent over 30 years analyzing the global energy sector on Wall Street and in many other roles. After 15 years at Goldman Sachs, where he was a partner, he has spent his recent years as a senior advisor and now partner for Veriten, as a director at ConocoPhillips, and as a senior advisor for Warburg Pincus. He is also on the Center on Global Energy Policy’s Advisory Board. RJ and I spoke about how Wall Street is viewing the energy transition and the turbulence that has wrecked energy markets over the last several years. I asked him about the lessons he has learned in his years as an energy market analyst and how this experience informs his view of the path ahead. Arjun Murti, thanks for joining us on Columbia Energy Exchange. Welcome back to the program once again.

Arjun Murti [00:02:23] Jason, always great to be with you.

Jason Bordoff [00:02:25] Thank you and thanks for all you’ve done as part of the advisory board of the Center. And now you have new things taking up your time with our friend Maynard and others at Veriten. So congrats on the new job and hope that’s going well.

Arjun Murti [00:02:37] Thank you. It’s been a lot of fun transitioning back to kind of a more public externally facing role to discuss all things energy transition and pretty, pretty excited. And it’s been a fun start to my new career at Veriten.

Jason Bordoff [00:02:50] So you’ve been spending even time before joining Veriten kind of in that public role with podcasts and your substack writing and and other public speaking. Just let’s start by talking about what you’ve been talking the most about, which I think overlaps some of with some of what I’ve been writing and thinking about, which is the process of an energy transition, even if we should call it that. We’ll get into that and how the risks we might face if we don’t get this right and it turns out to be disorderly, more disorderly than one might hope. You’ve kind of talked about how the energy transition as a concept needs to itself. Transition? What what do you mean by that?

Arjun Murti [00:03:30] Jason As you know, I spent 22 years as a Wall Street energy equity research analyst, and then since 2014, I’ve had a series of these behind the scenes type roles. I then really enjoyed being on your advisory board, which I’m still on board of a publicly traded company at a private equity company. But it was something about the last several years and maybe 2018, 2019, as the ESG movement started on Wall Street, as people started really owning in on some of the climate challenges and energy transition that I actually simply, frankly became dismayed at how I think most people talk about energy transition. So I started writing publicly again via what I call super spiked. It’s a for free on Substack type publication, and it is meant to address what I am calling a very messy energy transition era, where you’ve got this clash of sort of early out ideology. Whether it’s left or right, you’ve got a clash of what traditional companies think they should be doing or what people want them to do. And I am concerned that we’re headed for what I’ll call a worst of all worlds where we don’t actually transition. We simply continue to have rising greenhouse gas emissions and high and volatile commodity prices as a result of underinvestment. There is no point to that. And so I would like to try and contribute to what I will call a healthier energy evolution. And I do think, Jason, it’s very compatible with the work you spearhead at the Center on Global Energy Policy. It’s why I am proud and really enjoy our engagement. I, of course, approach things more as a as a Wall Street investor type person. You come at it from the policy world, but I think there’s a lot of synergy there. But this this is what I’ve been trying to do here over the last a little bit.

Jason Bordoff [00:05:11] Yeah. So you and just to remind people of your background as an equity analyst and as you said, working on Wall Street and Goldman Sachs and you sort of famously went against some conventional wisdom by predicting surging oil prices above, well above $100 a barrel back in the late 2000, How does that moment compared to where we are now? This industry, as you know, is no, the energy sector or oil markets are no stranger to boom and bust cycles. Is that is that just what’s happening? Again, we had a boom cycle, then a bust cycle, and now we’re seeing another one. Or is there something different happening now that makes you more concerned, as you said, about what a poorly managed energy transition might look like?

Arjun Murti [00:05:56] I think there’s some similarities and some big differences with the 2000 era. I called it the Super Spike era, but the boom of that period from 2000 to 2 2014, I think what is similar is I think there’s a lot of what I’m going to call misperceptions about the direction we’re headed. I think a lot of people think we’re on track for a pretty quick falloff in traditional fossil fuel supply or demand for it, I should say, whether it’s crude oil, refined products, natural gas and coal, that may be true in some decade. I don’t think we’re on track for it this decade. You know, it’s a this perception that there’s going to be a quick transition, I think is leading to some underinvestment that is creating. A much tighter market for, let’s just call it this coming decade. I think the part that is very different is the last boom was driven by China joining the WTO and very robust now. And we see the economic growth. That is not the type of environment we’re in today. We have a period where all of the focus on transition is often on let’s limit fossil fuel supply and then let’s pretend we’re making the changes on the demand side. And that that, to me, in a nutshell, is the challenge with the transition. We’re not actually transitioning in all. We’re doing both, frankly, traditional investors. And then some of the policy steps we take in is disincentivizing the traditional fossil fuel supply. And that is leading to what I’m going to call a boom bust period. I don’t think it’s going to be a smooth up cycle like last cycle in an environment where you do not have spare capacity, where you do not have robust inventories, where you do not have robust investment, you do not get to have economic growth, we need energy supply growth, whatever form you want to call it. We need energy supply growth to have economic growth. And in the absence of that, I think we whip back and forth between periods of $120 oil like we saw last May and June, to then periods where you put you put a brake on economic growth and you have periods of softer prices in that boom bust cycle, which, as you correctly point out, has always been a feature of energy markets. I think those cycles are going to be shorter and sharper. Looking at this decade again, I think you’ve made this point, Jason, which I agree with, is we’re investing in oil and gas supply as if we’re completely on track to meet our climate objectives, which one might define as some rapid falloff in coming years of oil and natural gas demand. I make the point that coal demand hasn’t even peaked around the world. That’s probably what has surprised me the most. It is declining here in the U.S. and I think that trend is irreversible. There’s probably a current uptick in Europe due to the obvious challenges with Russia gas going away, but it is growth in China overwhelmingly and down the road. We’ve not even started having growth in India. And so if you’re in the developing world and you have large piles of domestic resource, that is low cost and where there’s lots of jobs and other revenues and investments that go with it, I think it’s going to be very hard for the world to stop using coal. So then you start getting to oil and natural gas. And I think there is a lack of I will just call it honest discussion about what it would take to actually stop using, especially as much crude oil demand. I think it’s actually possible. I think we’re not on track for it. Most of the focus is on let’s limit fossil fuel supply. And of course, most of that focus is on much limited in the United States, Canada and Europe, which again, I also think we have huge issues with. So we are investing as if demand is going to fall rapidly by the amounts that the IEA calls for in its net zero by 2050 report, when in fact oil demand is much more likely to be around 100 million barrels a day in the coming decade. You can say plus or -10 million barrels a day around that as your sensitivity. And we’re investing as if it’s going to fall off in the 2030s by 30, 40, 50% is a pretty big gap in terms of, I think the CapEx that will be needed and what you know, what demand will actually be.

Jason Bordoff [00:09:49] But are we seeing that lower investment and reduced CapEx, as you say, because of what you’ve described, you know, as as broad misconceptions or conventional wisdom that that may not be, in your view, where things are headed? ESG pressures and divestment pressures or policy that doesn’t allow access to to develop resources? Or is it just the fact, as you have also pointed out, that this industry destroyed a lot of value over the last decade, had terrible returns, and we’re just seeing markets kind of react to that and say we’d like to see some profits and dividends and maybe don’t do that anymore. So is this just market forces or is there something about these broad social pressures?

Arjun Murti [00:10:31] I would attribute the bulk of my CapEx is low to the traditional market forces and a really poor decade of profitability as well as what I will call a more uncertain outlook as to demand going forward because people don’t know how quickly we will transition. Right. Which is a legitimate concern. That’s not an ESG pressure. That’s not a problem of some politician, you know, yelling things that some people don’t like. That is just a fundamental fact that as an analyst, I don’t know if oil demand is going to grow, stay flat or shrink. And that uncertainty is not something that historically existed. So this is a sector that over 2010 to 2020 the previous decade had a 0% return on capital employed. That’s a common profitability metric. I don’t think you have to be a Wall Street expert to know that 0% on profitability is a really low number. They were promising much higher numbers and I would say completely missed it. So if you’re an investor and you say, hey, commodity prices are normally quite volatile, we never know if we’re going to have a recession or not. But separate from that, there is some uncertainty as to whether we are going to have a transition in oil and gas demand. Maybe, I think oil and gas demand. It’s going to grow. Maybe I don’t, but it’s uncertain. And I’ve got this legacy of port investments. As a traditional investor, there is no question if they give me the money back first and again, I’ll say that is the overwhelming reason why CapEx is still low. I think the number two thing is we’ve gone from a really deep trough encoded for the sector where companies lost billions of dollars to in 2020 to just two years after COVID having record returns on capital of 25%. And when you go from trough returns to peak returns within two years, there’s no chance CapEx is going to ramp up as maybe as much as some would like. The ten year historic profitability is still pretty poor, even if we include this one very good year we had in 2020 to mitigate output. Most of the issue, the overwhelming majority of the issue on the fact that market forces and traditional returns have been poor and investors want to see better profitability before they, quote, trust the sector again going forward.

Jason Bordoff [00:12:36] So that that I think is a really important point and including what you said about, again, there’s nothing new about boom bust cycles. There’s always some uncertainty about what oil demand will look like some number of years in the future. But what’s different this time? In the past, you pretty much knew that in the long term oil demand was going up, not down. Assuming you had economic growth and population growth around the world, that is genuinely more in question. Now, we can come back in a moment to kind of what the timeframes are and is it likely to happen in the next couple of years or is it a decade plus out or even longer? But but there’s more uncertainty about that, and that affects people’s willingness to put capital to work, maybe a higher cost of capital, what timeframes they want to see projects pay back in. Plus, poor capital discipline, poor economic returns over the last ten years. Again, that’s not about people misunderstanding where we are in the transition or net zero 2050 commitments getting ahead of reality. What do you do about that? That that is what has to happen for a multi-decade process of transition. There is more uncertainty. How do we manage that? What’s the role for the private sector? What’s role for companies, for industry, for investors, and for for government?

Arjun Murti [00:13:47] I think it’s it’s a great question. I fully, wholeheartedly agree with your framing relative to that historic population growth. Economic growth means energy demand. Growth means oil and gas demand growth. There is greater uncertainty about that going forward. And we have this decade of poor profitability. You know, I think this gets into what kind of policy steps might be helpful going forward. To some degree, there is this element of market forces will play out. I think the debate will be how many years of good returns on capital do we need to have or better profitability. What everyone wants to say before investors start gaining more comfort that some amount of CapEx is is possible? And listen, CapEx was up in 2022 versus 2021. It’s going to be up again in 2023. So there is some signs that there is a recognition, hey, these markets are probably going to be tighter for longer. I think the parts of policy that I really push back on most is the idea that you can have a true energy transition simply by limiting fossil fuel supply. And somehow only in some places that we have access to, like the United States, Canada and Europe and not really be serious about the demand side. And so one of the things I spent a lot of time on is our complete failure to achieve our corporate average fuel economy metrics where we have these standards legally. Auto companies absolutely make them. Yet we missed the actual target by 80 to 90% because we drive heavier cars and more SUVs. And so versus 3 to 4% CAFE promised government mandate growth. We actually achieve 0.3 to 0.4%. And Jason, that is the difference between divorcing gasoline and oil demand from economic growth or not. How do you break that cycle of where you have economic growth? And it means you have to have gasoline demand growth. You can actually do that portion through efficiency gain. Instead, we simply yell at oil companies, investors yell at them for wasting a bunch of money. Last decade, some politicians yell at them and say they’re being greedy or what have you. It’s fine. It’s all just rhetoric. It is not leveling with people and saying, if you really want to address climate goals, we’re going to have to take a very different view towards efficiency as the first step. That is not the only step. That is the first step. And let me ask you, why in Europe was I able my son goes to college in Scotland. As you know, I rented an SUV. They got 59.9 miles per gallon. It almost certainly had a hybrid. It did have a hybrid engine, not plug in a forced hybrid engine. So you had to use it. And I’m sure the pickup was not as good as in America. It was not as good as an American as you can just do those two metrics. It has 60 miles per gallon still. This is called 20 hearing is that is a meaningful, meaningful opportunity to reduce oil demand. Let’s do it. If you if you should do it not just for climate reasons, the greatest thing you can do is free your economy of being dependent. On as much energy of any type. And this is a very important so it’s just an example. It’s one example of where the rhetoric focuses on one thing, because frankly and I get it, it’s much easier to yell at oil companies than it is to level with people about the types of cars that we drive.

Jason Bordoff [00:16:55] And let me ask you about where you see oil demand going from here, as you say. We’ve gotten it has been more resilient than maybe some people thought. And yet we see, you know, in the last two or three years share of EVs in the U.S. as new cars sold, going up from around 2 to 6%. Still small numbers, but the growth rates are large on an annual basis. If you look not at the net zero 2050 scenario, we can come back to that and what impact that has had. But just there all all the other scenarios for where we’re currently headed, the IEA projects fossil fuel use in all scenarios peaking within the decade. I think you have a view that that that that oil, gas, even maybe coal demand growth is going to be more resilient than some of those forecast. But given the pace of growth in clean energy, why why are you skeptical that we’re going to make a dent? Let’s start with oil demand.

Arjun Murti [00:17:49] So right now what I look at, especially this is called clean energy investment. I will say I think the IRA we can get to it has been a big catalyst in terms of stimulating a lot of different business models and venture capital and private companies and some public companies to really focus a lot more on it. My sense is right now that that is going to take a wedge out of what would have otherwise been more fossil fuel supply growth. That is very different than saying it’s going to really make a dent into reducing fossil fuel demand if you take that. So if you take oil demand again for this decade, almost all of the leveling off in rolling over of oil demand comes from a meaningful increase in efficiency gains, of which there is no evidence in the data that is happening. You can look at the US statistics I pointed out. You can look at this on a global basis, which I think is the most correct way to do it. There is an ongoing efficiency gain that always happens year in, year out, and that ongoing efficiency gain does sort of inherently level off oil demand as population growth slows in the 2013 and 2014. But the accelerated reduction that the IEA, BP and many others forecast it takes fuel economy is a given when again, we miss 80 to 90% of it. I don’t understand why they do not back test these numbers or why they think the future success rate is going to be much higher. Now in the U.S., we are up to about two thirds, maybe 70% of our vehicles being SUVs. And the SUV itself does become more efficient. So perhaps at some point it will kick in. But the IEA has a great graph for the rest of the world where 85% like cars, 15% is Are we short the developing world what they make us? And where are the discussions about either them not mimicking us? I don’t think it’s our place to tell them what to do, but to figuring out ways we can motivate again, the type of SUVs you have in Europe, which are smaller, less acceleration, so forth, to ensure we could have much, much higher fuel economy and that that’s the next decade. So we’re not on track for efficiency gain. I think with the EV ramp, this idea that a singular technology is going to be the real key to displacing transportation fuel demand. Again, I’m not so sure about that. There’s a lot of issues with batteries, supply chains, critical minerals, all topics that I know we focus on at the center that I think are going to make it a challenge, things like affordability. You know, Jason, I’ve driven a Tesla for the last seven years and I’m very lucky, right? I’m a retired Goldman partner. I can afford it. But as importantly, I live in a single family home where I can charge in my garage. I live in an apartment. If you don’t even live in an apartment. And literally there are many people with many different living styles that are, I would say, create a real question of how you go to a 100% or at least overwhelming TV fleet and say, how do we motivate progress? How do we get the fuel efficiencies? Do they kick in? Why aren’t not plug in hybrids, but just hybrid technology where it becomes part of the operation of the car? Why are those metric? Why is that not more of a part of policy to ensure we start rolling over the curve? But I would say any country, whether you’re long, loyal or short oil, there has to be a motivation to having a bigger multiply of GDP growth relative to energy supply growth. This to me is a very important step that I, I don’t know why we ignore the policy. We just have these platitudes. We’re going to be 100% TV without really thinking through critical minerals, supply chains, batteries and all these types of issues.

Jason Bordoff [00:21:14] Yeah, I mean, that thinking is happening, obviously, but these are hard challenges, as you say, and they combined with industrial policy and desire to create jobs in the U.S. or in Europe or elsewhere, and national security concerns about, you know, the dominance of certain countries like China and those supply chains. So there’s a lot of roadblocks. So the question is where in my question for you is where does that take us there? There are a lot this is. Harder. What I hear you saying is this is this is hard. We’re not going to see. It doesn’t just easily happen. You have to work a lot harder than maybe some realize, in your view, to bend the curve in a meaningful way on, say, oil demand. So the the take away from that, that leads you to a place, I mean, that could lead you to two places. One is what is the policy prescriptive path, not just in the US, but but the rest of the world to make that fall happen much more sharply? Or the alternative is this just takes time. And you hear a lot of people, particularly in the oil and gas industry, say at this moment of energy crisis and concerns about energy security, we need to be more realistic. We need to be more pragmatic. And I understand where those sentiments come from. I want to know if you share them, but that takes you to a place of meaning. It’s just going to take longer. And then that takes me to a place of saying The IPCC sixth assessment report just came out and told us how severe the risks of climate change are, how quickly emissions need to fall. So how do we reconcile the fact that the numbers of meeting the world’s energy demand are what they are, but the numbers of meeting our climate goals and limiting carbon emissions are what they are too. What do we do about that?

Arjun Murti [00:22:53] You know, it’s actually a huge question, Jason. I think we can probably break it up into a few different pieces. You know, let’s say we were not on track. We were never on track for an easy transition. And I think that’s been one of the big problems. Hey, levelized cost of energy says solar and wind are the cheapest to all we need to do is just will more of that stuff. And if we didn’t have these evil big legacy companies standing in the way, we could just simply do more of it. And that’s just not factually true. When you don’t include the cost of transmission, when you don’t include the issues around permitting reform, when you don’t include the fact that you need storage to have 24 seven 365 energy, it is still the cheapest in some places and it’s definitely not the cheapest in a whole bunch of different places. That’s one example of where to use the varied in phrasing truth and energy has been lacking. And so we were never, ever on track for an easy transition. What I actually take some comfort in, where I push back on the folks who are more negative is some of the issues that people have been reminded of, things like geopolitical security, things like affordability. I believe that’s going to contribute to actually a faster transition than if we only were focusing on greenhouse gas emissions, because you always have to focus on all these issues. We know that we cannot live without energy for 5 seconds, right? The minute Russian gas is cut off from Europe, what is Germany doing? They’re restarting Lignite Call, for goodness sakes. Right. So they couldn’t live without it. And this is the most forward looking country in the world on climate stuff. And so we’ve always needed to address all these issues. How is nuclear not part of this solution? There are lots of challenges with nuclear in terms of nuclear waste, in terms of people not wanting it in the areas they live in, in terms of the cost and timing to build. But France has shown you can basically had the decarbonized grid if you want to, you know, so we can have a separate discussions probably beyond the scope of this podcast. But in trying to limit us by saying we only want to get rid of fossil fuel supply and we only want renewables, we were never on track to achieve one iota of what I’m going to call climate goals. To me, the first objective is always gross zero energy poverty. I that’s a personal opinion that that’s what we need to focus on. But as part of things like geopolitical security, you’re better off not relying on fossil fuels. There’s no question about it. If you can displace, even if you’re an exporting country, if you can displace more of your crude oil, especially with other forms of energy supply, you’re going to be better off. So I will take the positive spin that the challenges we’ve seen post Ukraine are going to lead us potentially to a healthier transition. I will say on the IPCC, Jason, there’s a lot of pessimism that we are very unlikely to achieve 1.5. And, you know, that’s probably true. But there does need to be a recognition of the optimism that the eight and a half, six and a half and you know the numbers better than me, that those scenarios are also very unlikely to the point that some of those aren’t even being considered anymore. And whether it’s three or a little above three is kind of our max scenario. I am in no way arguing that that’s a reasonable objective, but at least we’re taking away more of the worst case outcomes. And now I think the debate is can we really get on track for two by 2070, maybe one and a half by 2050 isn’t possible. I don’t know. But but we’re starting to get to where that upside range is going away, even if what I’ll call what climate people would say is the best case outcome of one and a half is also going away.

Jason Bordoff [00:26:24] Yeah, it’s a good point. I think the glass half full view of looking at some of you know, what’s happened in the last ten or 15 years is progress is possible. As you said, the the the business as usual scenario for temperature rise in. Now is not as bad as some people feared. But but sort of the glass half empty is it’s nowhere close to being what it would need to look like for one and a half or even two degrees now, probably. And I mean, and we’re running out of time every year. That sort of sort of goes by. What do you think the role and I know you think a lot about this for for clients. You’re as you said, on the board of one company, but you’re speaking for yourself, not for any company here for big oil and gas companies. When they look at the outlook you’re describing. And I think what you’re saying is see a world where there’s a lot of money to be made, there’s more, there is opportunities and maybe a need for more investment. You hear some politicians, Biden, for example, asking the industry in the near term to to produce more, not not less, but for those who also want to hopefully in reality or in perception, be setting up plans for themselves that are consistent with a longer term transition, investing in different types of energy where they have capabilities to do that. What does it mean for a company’s investment plan? What do you think oil and gas companies should be doing today to deal with that tension we’re talking about between today’s reality and where we want to get to faster in the future?

Arjun Murti [00:27:55] Thank you, Jason, and thank you for clarifying that. I’m definitely here speaking on my own behalf and not on any of my affiliations. I will say I actually have a pretty optimistic outlook for the role of traditional energy companies because I think they’re going to be needed. I think we are not being serious about the challenges of reducing demand. There’s a huge developing market question in terms of demand growth and how that’s going to be met. And there is a need for these companies to provide the oil and gas that the world needs. So for any company, the one of the key goals is how do you remain viable over the long run? And the remain to remain viable has changed the playbook that worked ten or 20 or 50 years ago for an oil and gas company is not going to be the playbook going forward. There are going to be more energy supply sources and there is a question of whether how companies will compete with that. There is absolutely need, I think, for all companies to get to zero or net zero scope one and let’s just call it scope one and two type emissions that I think that’s going to be a critical part of any successful energy company strategy. And I think some of them will have logical business extensions into newer areas. There’s a company, I think I’ll name them, which is Occidental Petroleum, which has a history of enhanced oil recovery. And so for Oxy to produce is pursuing QC, carbon capture, utilization and storage and direct your cap capture. I have no idea whether that will be successful or not for Oxy, but it makes sense for then given their history to look into it. And there are plenty of those kinds of examples. I’d still say though, is we need traditional oil and gas companies to produce the oil and gas that the world needs. And if let’s just say I am too optimistic on demand and demand goes away, no one should really care whether these companies survive. There’s plenty of history of companies coming and going. Sears used to be a major retailer and they were displaced by. I remember when Wal-Mart came on and people said, Oh my gosh, Wal-Mart now controls all these hardware stores. And then Amazon came along and kind of pushed Wal-Mart. And now Wal-Mart’s made a comeback and maybe some mixture of I like so like this plenty of evolution that companies need to go to. And that’s up to the companies to get that right. And if we have a faster transition into newer energy supplies and say, I am forecasting or some of these managements are, then they’re going to be left behind and no one should shed a tear for oil and gas company. I think we can all agree about that. So we need oil and gas to be produced for however long there’s still demand. One of the points that I think I would emphasize is I find a lot of concern that somehow there’s a lot of pressure on U.S., Canadian and European companies to not produce in the US, Canada and Europe. And I don’t that’s the logic I do not understand as a country. I’ll speak as an American. Now. We should want the US and Canada should want this as well to be those last barrels produced Collectively, U.S. and Canada produces 23 million barrels a day. Global oil demand or liquids demand is 100 million barrels a day. And even under the IEA’s net zero scenario, which I don’t personally subscribe to, but let’s just put it out there, you have 30 million barrels a day or 40 million barrels a day of demand in 2050. And so we should want to be the last barrel produced. And I would give credit to Adnoc in the United Arab Emirates and Saudi Aramco and on the gas side, Qatar, of having actually pretty credible decarbonization plans to their credit. I actually worry that the Permian Basin may have more flaring than does the UAE, and that’s not a good place to be. I will credit the Canadian oil sands industry through their carbon capture hub to be targeting zero scope one emissions, and that will eliminate all the scope. One disadvantage that currently exists with the oil sands is only a handful of facilities up there. It does not take that much real estate or plant equipment to produce quite a bit of oil with frankly, what is going. To be a competitive advantage from a carbon standpoint. You know, so I think considering these areas, to me we should want more U.S., Canadian and frankly, European not optimistic about that production and not just cede that to the rest of the world from a geopolitical standpoint, but also from an environmental standpoint, from a job standpoint, from a tax revenue standpoint. For all these reasons, I think we’ll have a healthier transition if we think about it that way.

Jason Bordoff [00:32:03] And what would that actually mean to implement? I mean, one place that could take you is don’t restrict production, but do you mean going further than that where if oil demand fell to 90 and then 80 and then 70 and eventually much lower, you know, markets would figure out what barrels are most cost competitive and a lot of those would be in the Gulf and maybe not in the U.S. or Canada or Brazil. Or are you actually saying you want to see government intervene in markets to prop up that production, give it a competitive advantage, which I would say has maybe some other risks associated with it?

Arjun Murti [00:32:34] I’d actually like to get to a topic that you and I have discussed about the role of transition assets in the transition for strategic purposes. But I want to answered this question that you specifically asked, which is whether a U.S. Canadian or any other region anywhere in the world, you’re going to have to compete on a cost basis, on a market basis. So I’m not advocating that we should somehow artificially support us in getting companies fresh. Our full stop. I will say the biggest bottleneck right now is getting infrastructure built. And that’s a process, of course, including solar and wind and a whole bunch of different areas. But pipeline bottlenecks are a real issue out of Canada. It’s been an issue out of the Marcellus. And I’d argue if you want to protest pipelines and infrastructure, go to Russia, protest those pipelines, go to Iran. I guess I’m speaking as an American protest stuff in the rest of the world where they are not geopolitical allies and where the pollution is going to be higher, both in terms of traditional pollution and carbon content. And let’s make sure we have strict environmental standards, but ultimately the kind of infrastructure growth I think we’re going to need. So let’s not stand in the way of allowing whatever supply is warranted to come on the market based on cost structure to get to the market. I think there is a challenge, though, where there are some market decisions being made. For example, shutting down refining capacity in the northeast of the US, that might be creating some risk from a geopolitical from an economic standpoint. This is a topic that Jason, honestly, you’ve written about that I probably initially would have pushed back on, but in that in our discussions on it, I’ve come closer to kind of your perspective of what should we do about this? And I don’t know that you have an answer per se, but that is a topic worthy of discussion. If we have insufficient refining capacity in the U.S. and we are still using X amount of millions of gallons of gasoline in the in the northeast of the U.S., what do you do about that? Private companies are saying we don’t want to be in the U.S. Northeast refining business anymore. They’re making market decisions. Maybe they’re doing renewable diesel plans that has some tax credit associated with it. You could debate that a little bit. But even without that, these are older plants. They’re not competitive on a global basis yet. We now have perhaps a strategic exposure there. And I think it is a legitimate question of what is the role for policy to ensure that people who live in the Northeast get to have whatever gasoline they’re still going to consume for however long to consume it? It’s a very good question that you have frankly raised in your writing, But I think actually it I’ll say this has been misinterpreted by some I think you’ve been very clear and I hope people will take the time to read what you actually wrote rather than guess or make political statements of what they perceived that you wrote.

Jason Bordoff [00:35:07] Well, you may I appreciate your bringing it up. And the question that Megan O’Sullivan and I sort of wrote about in The Economist and then Foreign Affairs, and then two of my colleagues here, Gautam Jain and Louisa Palacios, went a little deeper on analytically was, as you said, we’ve talked a lot about these different competing pressures on companies, ESG, divestment policy restrictions, but also just market forces and uncertainty about the future and the time periods in which some of these projects take to pay back. That applies, as you and I have talked about, and I asked you a moment ago about on production, but but also all the rest of midstream, the infrastructure that you need to build. Once you have crude oil, you have to do something with it. So the refineries that we need and there’s two questions, I think, at least in that one is just from a market standpoint, is is there a mismatch now where for a period of transition, investments in some of that infrastructure are still needed? Because, again, there’s a gap between reality and where we need to be. We don’t know how quickly that’s going to turn over and we’re going to get on track for our climate goals. Even in a world where we are in oil, demand is falling, you still need many decades where refineries are refining oil, but the capacity utilization may go down, the economics may start to look worse and worse. And we’re going to we’re going to I’m worried we’ll we’ll have a mismatch where we start to close. A lot of the market forces force a lot of those assets to shut down. We may see that with dispatchable thermal power on the grid, as well as we scale up renewables, where economics is forcing the retirement of some assets before we’re totally ready for all the alternatives to pick up the slack. And I don’t know exactly what we do about that. I’d be curious what you think and whether there is actually a role for government in facilitating some investments in those things. And obviously that takes you to the second place, which is you said people who care deeply about climate, some of them, many of them are deeply concerned about investments in infrastructure and assets, whether it’s pipelines or refineries or anything else that are there for decades. And if we build them now and they’re operating in 30 or 40 years, that means we’ve missed our climate goal. Maybe we need to plan for them to wind down faster, but that’s easy to say today. I understand why people are skeptical that that will actually happen. And once they’re built and they’re profitable and they’re economic and people need to earn a return on their investment, it’ll increase. This is this idea of, you know, lock in. It’ll increase the resistance to moving faster to a transition. I mean, do you see that as as a as a legitimate concern? And how do we how do we thread the needle?

Arjun Murti [00:37:46] I mean, I think a couple of different things there. I think, first of all, you’re right that it is often market forces causing, for example, coal plants to shut down and for replacing them with variable solar and wind. If you haven’t included the storage in that cost of solar and wind or whether you include the cost, not just have the storage, you’re going to have a less reliable grid. I think I worry greatly about that. I just look at it and say, if global coal consumption is still growing, the relevance of us shutting down our remaining dispatchable coal plants, it can feel good to the local community or the local activists. It is not making any difference. School being, all we have is in less reliable grid. So I’m not arguing that we should artificially keep coal plants up, but let’s make sure we have the storage in some form. Maybe it’s geothermal reservoirs. It could be battery storage or it could be in or not allowing those coal plants to shut down till you have the storage to ensure that they can shut down. I think, again, this is often this idea that if you build supply, it will ensure demand. And again, I’d argue for flipping that on its head. It is going to be demand growth that motivates supply growth. And I equate this to perhaps, you know, if it’s a good analogy or not, but the war on drugs. Right. So we at some point decided as a country, a lot of Americans are using illegal drugs. It’s bad. Let’s go get all this Colombia, the Mexican cartels, and then then we’ll solve the problem. And we have a little bit of that same mindset that by killing supply, somehow it’s going to magically killed demand. And I push back on that. I think I think the issue of what do you do about it? You know, it’s very hard for me to say as a markets person, we need government support to ensure we have adequate infrastructure in these traditional areas where companies have competed for a long time. I think we do need to have an honest conversation about it that are we restricting some forms of infrastructure that does lessen our reliability. An example might be we do have a robust refining system in the US Gulf Coast that is grown and expanded. How do we ensure that that product can easily get to the US northeast? You raised the issue, Jason, of strategic stocks for times when there are outages or disruptions, which is a good point. I think there does need to be an honest all of the above type consideration and how you ensure that the demand that exists exists. We all set to be again, I’ll get back to it honest about why we demand oil and gas. We don’t demand it for the heck of it. We don’t demand it because it’s there we did. Or that somehow oil companies are forcing the supply in us, and if they have a 30 year project, we’re going to be forced. It’s not at all. We buy it for everything we do. We’re going to be recording this podcast, the headphones, we’re wearing, the microphones. Every aspect of our lives is driven by energy. And so how do we ensure we have alternate forms of energy that can truly compete, perhaps with some subsidy help today, But hopefully those scale, how do we create motivations for demand substitution? I drive an electric vehicle not because I’m an environmentalist. I don’t think anyone would accuse me of being a die hard environmentalist. I drive it because it’s a better car to drive. I like charging at home. I like single pedal driving. How do you create demand alternatives? How is a country do you think about improving your geopolitical security through some of these newer forms of energy? I think we should be exporting our hopefully cleaner, lower carbon environmentally sound with American jobs and tax dollars, oil and gas to the rest of the world. What are people in Africa, in rural India and other parts of Southeast Asia should do they have to be dependent on Iran and Russia? Is that social and economic justice? Right? And so we can hold our companies to very high standards for sure, and let’s do it. But again, I think this idea that supply causes demand, I’m going to push back on that is Canada probably the chicken and egg premise of this whole discussion that I take the other side that we’re trying to reduce demand and we’re trying to create substitutions for the for the supply that we have.

Jason Bordoff [00:41:33] Let me ask you in a little bit of time we have. Left. Also, like where we are in the market today, we’re talking about risks of disorderly transition and we’re talking about under-investment. And oil prices have plunged recently. There’s macro headwinds in the bond market and the banking sector. But when you look at tell me the timeframe you’re looking out over. What the fundamentals show and where you think we’re headed and in oil prices in the next year and maybe next couple of years.

Arjun Murti [00:42:06] Jason I actually love the question because that the Wall Street trader will say you’re talking about undersupply. Yet oil is down $50 from last June. Does it seem like it’s super undersupplied, at least not at the moment. But again, I have not liked the supercycle language that many have adopted. It is the type of language I used 20 years ago. And as we started with, I don’t think that’s the type of environment read to me. We’re in a demand destruction environment, which means because you didn’t originally have spare capacity, you had low inventories and you have insufficient CapEx. You spike the price to the point that you have to knock out the demand that would otherwise be there. Again, it’s demand driving the world here. So you’re trying to knock it out in $120 crude oil price with a $50 crack spread means $170 per barrel of gasoline price. In human terms, that’s $5 a gallon here in the U.S. Higher prices in the rest of the world, the dollar was weak. And what was the equivalent of, you know, 500 to $600 a barrel equivalent natural gas prices in Europe, that destroyed a lot of demand. That’s not a good environment to be in. But when you destroy the demand, you end up with a short term surplus. That’s what the market is trying to do there. It is trying to knock out that demand and then you get some inventory build. As you’ve seen in the U.S., you get inventory build as we’ve seen in European natural gas. But at what cost? You shut down your industrial base in Europe. That’s not a you. You’re bringing on lignite, coal, like I said, like there’s nothing good. Like even for oil companies, a boom is such a short term boom bust environment is not is not good. Clearly, they generate a lot of profits in 2022. The profits are going to be down here in 2023 and we’ll see how the year transpires. So boom, bust, I’d argue, is bad for consumers, it’s bad for economic growth. And that is the kind of environment I think we’re going to be in for the next little bit. I will say it was controversial at the time, and I was on the other side of this was President Biden’s decision to release strategic petroleum reserve stocks. I think we can still debate whether ten years from now we’ll look back and decide whether that was a good thing or not. But there’s no doubt that that also contributed to lower prices. So as someone who is a critic or maybe a skeptic of it, again, time will tell. But it was a good decision or not. And I might still say I would have preferred that not happen. But I think that also did contributed to lower prices. And so if we’re going to critique it, we at least have to be honest that it probably did help lower prices in the short term, which I think was an objective.

Jason Bordoff [00:44:26] Yeah, a lot of things I want to follow up and what you just said, the and I think the data shows the rebound in coal in Europe in response was was fairly modest and it did accelerate a lot of clean energy deployment, too. So there’s two sides of that coin in terms of the impact. But but I think you’re right that very high prices destroyed demand, particularly industrial demand. That’s not necessarily a politically or economically desirable way to do that. Well, when you look at what’s happening just in the broader macro economy now, I guess nobody knows quite how those risks in the banking sector are going to play out. But but what impacts do you expect that to have in commodity prices? Is that short lived or are we going to see that longer term?

Arjun Murti [00:45:07] Well, Jason, I’m going to apologize for a slight tangent here, but when people say they want the Fed to be more involved with caring about climate, when you see the kind of problems the banks have had with the stuff the Fed is supposed to control, I’m going to have to say I’m going to push back that that is something that is desirable or will lead to good outcomes. I mean, Silicon Valley Bank, I’m not a banking expert, but essentially the deposits left and they bought Treasury bills and Treasury bonds to lower the yield. And as they declined in value when interest rates rose, they ended up having a run in a bank. I mean, this is not complex derivatives that are hard to understand or subprime mortgages. This is basic banking. You have deposits, you loan them out, you have an investment portfolio and some mixture of the banks management, the bank’s board of directors and the supervisor that oversee it did not get that right. And, you know, it’s beyond me to know who is exactly at fault. But again, let’s just be careful about giving our regulators more responsibility beyond their areas of expertise is the point I’m trying to make. When there hasn’t been obvious efficacy in the area. Simplistically, they should they should know best, you know, whether this is the start of a banking crisis or not. As someone who did not correctly call great financial crisis one, I do not have a track record of being good with bank crises. What I will say, though, is we this is the type of environment I would expect. I don’t think we’re in the kind of smooth economic growth environment that we had in the 2000 for many, many different reasons. Some of it’s just the inherent tensions that now exist between the US and China. Globalization is an overused term, but there’s no doubt there’s some realignment of our supply chains that are coming. There’s lots of reasons, as we already discussed, for why traditional energy investments are low. A lot of which is due to market forces that is going to lead to inflation, that is going to lead to desires to raise interest rates. And so this type of disruptive environment I think we’re in for a decade of it. That is not I want to be clear that is not the fault of any one policy or any one ESG movement or any one oil company or any one clean energy initiative. It’s just it’s an all of the above blame, actually. And again, I’d start with let’s actually be honest about what the underlying reasons are, and then let’s try and address what I think will make the biggest difference, which which I keep saying it again. We’re going to have to be honest about the demand side and what we can do to evolve how we demand traditional energy.

Jason Bordoff [00:47:34] And as long as you’re commenting on, you know, the impacts of Fed policy wise or not, you know, I think the age of cheap money is over for a while. How did the era of near-zero interest rates impact the energy sector, and what do you think the fight against inflation is going to mean for the oil and gas sector?

Arjun Murti [00:47:52] So this is an to this end of let’s call it the free money era. It’s a great point to raise here, Jason, is I think people are saying, oh, this is going to make it more challenging to do clean energy. This is going to make it more challenging to do investments. And I’m going to push back on that. I think if someone has a truly great product or supply source or what have you, it will get funded, It’ll ramp. If it truly is differential, maybe subsidies help. That’s not the point. The point is that if it’s an exciting bit, Tesla is a great example. They show that you don’t want to create a compliance car that is only for environmental extremists. Create a cool car that people actually want to drive and we need to be how carbon friendly a Tesla vehicle actually is. But that’s for another podcast. There’s no doubt it is going to be, quote unquote, better than the equivalent version of a nice car with the same kind of performance characteristics. And Tesla has shown you need some different approaches and I think good companies will get funded. What is nice is that bad companies will stop getting funded and that is a healthy environment to be in. So we’re going through an adjustment process here. Maybe we’re going to have a recession and maybe that does lead to, quote, lower clean energy investments. But I’ll say that when you look at some of the high fliers of last decade, there’s been a big correction in a lot of what Goldman Sachs calls unprofitable tech. Clean energy is not outperforming any more of it, nor is it underperforming. I think the market is sensing there is a clean energy revolution going on. It may take 50 years, which should be more the time frame. I personally think this transition will happen, but but there’s a lot of excitement, some of it fueled by the IRA towards funding legitimate companies. So I’m not as pessimistic once we get through this little tumultuous period that somehow higher interest rates are bad. I think, again, to not over comment on Fed policy, some historians going to have to look back and say, was the zero rate policy for 15 years good or bad? And we could debate that. It’s beyond our capacity to discuss right now, but I suspect it won’t be looked on as a clear good thing. And there’s going to be some negatives that maybe we’re going to be able to get out of in the coming years.

Jason Bordoff [00:49:58] Can you try to explain something again to me that you’ve tried before and I still don’t understand, which is we’ve talked about. What you see as an outlook for under investment demand rising faster than investment in supply, may tightness in the market developing again, macroeconomic uncertainty. But looking beyond that and that means structurally higher or more of out and or more volatile prices in the future. And if I look at the oil futures curve, oil’s cheaper in the future. And you have often told me that that is not a predictor of price. But if people see what you see and then see the oil futures curve, there’s an opportunity to make money betting on the future price. And presumably that would bring up the back of the curve. So why is that not happening? And why do we have that backward dated curve we have.

Arjun Murti [00:50:48] So through a boom? It’s a great question. I going to try and answer it differently in the hopes of actually affecting some common ground here, as opposed to simply saying it’s not a predictor of prices, which it definitely isn’t. And there’s one can chart the actual evolution of spot prices and see what the forward curve was predicting a year earlier or whatever time frame had actually zero correlation to where we ended up. Maybe I’ll say it quite a different way. It is that very boom bust cycle that might result in mediocre prices on average going forward. So it’s quite possible that we go back and forth from, let’s just say 120 to 54. We’re going to pick some good guesses of what the extremes may be, and maybe that does then average 70 or 75. That’s entirely possible. But I’d just say I don’t think a 70 on the forward curve a year from now or two years from now necessarily means that that is going to be the price we’re actually going to see as we go along the way. And frankly, again, a boom bust cycle as opposed to a super cycle and back into 2000s that long into the curve did rally to exactly your point. It started at 20 when people were skeptical and as they saw that the easy oil that was developed after the seventies boom had gone away and that demand in China was going to be far more resilient to higher prices than anyone thought. That forward curve got as high as $100 a barrel, you know, in 2008 and again in the 2010 frame timeframe. So in that prior super spike area, we did see a big rise in the back end to exactly a point. So right now, I think the lack of a rise in the background, it’s been pretty well anchored around $70 a barrel. We’re going to talk in very round numbers here that is signifying one or two things. Either you’re right that maybe the or not you’re right, but that, hey, maybe the undersupply is overstated by likes. I mean, that could be one possibility. I think it is correctly saying that we’re not on track for this move type of increase of that like we had in the supercycle from 20 years ago. That’s a that’s another possible conclusion. And I think the third conclusion that we’re maybe getting that I’m getting at right now is we’re going to have a lot of whip arounds along the way, but we’re going to keep getting to these demand destruction prices, 100, 200 and 2050, whatever the number is. But the other side of that is slow down, if not recession like we’re seeing right now. And that could be the third reason, which maybe bridges the gap on why that forward curve hasn’t really risen. It it and that’s how I would maybe perhaps reconcile underinvestment that I think is existing with the fact that the forward curve is saying, hey, I don’t need you to go to 100 because we’re not going to have a smooth economic cycle. And maybe there is concern in the forward curve in believing that demand could roll over again. I’m not suggesting my demand is guaranteed to be correct. I could be wrong. It could fall off quicker.

Jason Bordoff [00:53:28] I want to see if you might conclude with a note of optimism. I don’t pre-judge your answer, so maybe it’s not, but I hope it might be because there’s been a fair number of glass half empty sentiments here about volatility ahead, mismanage, transition ahead, where we’re headed, including not coming anywhere close to our climate goals. That’s sort of a fundamental take away, I think, from the outlook, at least the baseline outlook you’re describing. But you’re also as you’re working a lot with clients with private equity and I think a lot of growing interest there in in the transition in new transition funds, in clean energy. And I was just wondering if you could talk a little bit about what you see and the trends are now in your work in terms of the investor appetite for putting a lot more capital into clean energy and. Chabat Give us any reason to end on a more optimistic note?

Arjun Murti [00:54:24] Jason I would have, even if you didn’t say this sincerely, ended on an optimistic note, because I’m optimistic about where we are, Where we were before was not realistic. The idea that we could have a quick and easy transition and one and a half and net zero by 2050 are all just magical things that we can wish upon a star and had happen. There was never any chance of that. I feel very optimistic that the worst case climate scenarios of over three degrees are just increasingly unlikely. I think a lot of optimism that we are now talking about energy more holistically, that there is a recognition that you cannot forget about affordability, that you have to be honest about things like levelized cost of energy when it comes to solar and wind and including the battery storage that we are now. Acknowledging that things like methane flaring, venting, which is the most impactful climate thing we can do in the short term, I believe and correct me if I’m wrong, 0.2 degrees of impact. If you really address methane as an example and a much shorter duration, our atmosphere that is totally solvable today, that it may be an area where it’s just a question of will and a little bit of CapEx, the cost of dealing with methane, the technology to do it, the confidence that we’re doing it correctly and not pretending to do it, all of that exists. I think there’s a lot of areas to be excited about. Unlike prior booms in electric vehicles, they are here to stay. Now, there were past promises in California elsewhere that completely failed. That’s not the case anymore. Now we’re just debating how much and how quickly of a ramp. So I’m not pessimistic on EVs. I just don’t quite believe in the by 2035 will be 100%, but they are going to be a meaningful share. I think the honesty of the discussion is improving. I think it’s up to people like myself. I am not I don’t think anyone will listen to this and think I’m a left wing progressive, but I’m also not a hard right person. I push back on the rhetoric from both sides. I think it is critical. It’s why I started my substack for people that are pragmatic, for people that are not extremist in their views to speak up, it doesn’t mean we’re right, but that viewpoint needs to be heard and we need to get this out of the culture war. We need to get this out of partizan warfare and have a legitimate debate of what is the role for market forces, what is the role for government policy? And as someone who is perhaps on some issues more right of center, while I might like limited government, I’m not for no government. I do not favor anarchy. We absolutely need some amount of regulation, some of the laws and nothing frankly comes to mind is an example. So I am optimistic. I would like to see the overarching goal be gross zero energy poverty, which is a global consideration. That then takes a realistic look of why we use energy and why the rest of the world is going to continue to want more of it with as small of a carbon and climate footprint as possible. And how do we keep reducing that ceiling from what once could have been eight degrees or six degrees or five degrees to what now is probably three or 3.1, 3.2? How do we keep bringing down that ceiling so that we can say, oh, you know what, It’s 2.8, it’s 2.7, it’s our worst case. And get that down ideally to at least two, which I’m reminded by some of your research scholar scholars, Jason, that two degrees was actually the Paris goal by, I think 2017. We’d like to be below two degrees and perhaps well below two degrees in some of that transition to it has to be one and a half by 2050, which we are not on track for, and we’re not going to be on track for it. And that’s not a question of will we need supply chains to ramp, we need permitting reform. How about some permanent reforms? So there is a lot to be excited about. I get excited that young people, including some of the people at the center, are excited about energy. That’s a great thing. Jason This isn’t about the next social media app. This is the most important topic in the world. How do we provide energy to improve our standard of living? That’s why we use energy. It’s why we use fossil fuels. We have the least number of people in poverty in the world today. We’ve had rapid population growth because of better economic conditions. We now need to do that with as small of a climate environmental footprint as possible. And please, let’s not forget about biodiversity. There are challenges with biodiversity when it comes to some of the solar stuff. Let’s include biodiversity. Those include clean air, clean water along with decarbonization. It is entirely possible, and I’m really very optimistic that we are on track for a better transition or more likely transition than we were three years ago when we were using fairy dust assumptions on what might be possible under some unrealistic timeframe.

Jason Bordoff [00:58:43] But thanks for ending on some optimistic notes. As you say, every 10th of a degree matters, and even two degrees will have some significant and worrisome impacts. But we want to get as close as we can to 1.5. And what you said about the inspiration we all draw on, the optimism we all draw from the students who work here at the Center on Global Energy Policy every day, nearly 80 of them now, which is just a fantastic group. Arjun, thanks for making time to be with us today. I always learn a lot by talking with you. We agree on a lot, but not everything which is good. I always my thinking is is really helped by these conversations and by hearing different perspectives and by the conversations that we’ve had for a long time. So thanks for sharing, sharing that with us and all our listeners today.

Arjun Murti [00:59:28] Jason, Thank you. And a big reason I enjoy being involved with the center is the very healthy discussions and debates we have. If we could publish our Slack channel, I think it would be a must read reading for everybody. I love the engagement, I love the debate. I am privileged to be associated with it and I thank you for your support and your friendship and continue to look forward to working with you in the years ahead.

Jason Bordoff [00:59:50] Same here. Thanks so much, Arjun. Thank you, Arjun Murti, for joining us today. Thanks to all of you, our listeners, for listening to this week’s episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show is hosted by me, Jason Bordoff, and by Bill Loveless. The show is produced by Stephen Lacy and Aaron Harnick from Post-Script Media. Additional support from Abby Rajendran, Gautam Jain, Akash Loj, Lily Lee, Daniel Prop, Natalie Volk and Kyu Lee. Roy Campanella engineered the show. For more information about the podcast for the Center on Global Energy Policy, visit us online at Energy Policy dot Columbia dot edu or follow us on social media at ColumbiaUEnergy. And please, if you feel inclined, give us a reading on Apple Podcasts. It really helps us out. Thanks again for listening. We’ll see you next week.

This past year has reminded all of us that the energy transition, energy markets, and geopolitics are inextricably linked. In the last five years alone, extreme volatility in energy prices has created uncertainty for consumers and producers alike.

For Wall Street in particular, an uncertain energy outlook brings up important questions about risk and strategy. Aligning energy investment with expected demand is hard, especially in the midst of an energy transition that’s happening in fits and starts. Yet, effective investment is vital for both energy access and climate progress.

How should investors address the tension between energy and climate needs? What do the coming years hold for oil and gas markets? And is the term “energy transition” even the right one?

This week host Jason Bordoff talks with Arjun Murti about how Wall Street views the energy transition and how the turbulence has wracked energy markets over the past several years. Arjun shares the lessons he’s learned in his years as an energy markets analyst, and how his experiences inform his view of the path ahead.

Arjun has spent more than 30 years analyzing the global energy sector on Wall Street. He spent 15 years as a partner at Goldman Sachs and recently served as senior advisor and now partner for Veriten. Has also had stints as director at ConocoPhillips and as senior advisor for Warburg Pincus. Arjun is also on the Center on Global Energy Policy’s advisory board.

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