Friday, November 6, 2015

Money Show 2015 - Mark Mills

Mark Mills was the third speaker at the Opening Ceremonies of the Money Show for 2015. His talk was called "Energy and Technology: The Virtuous Circle". He is the founder and CEO of Digital Power Group.

There is long term investing in tech and oil. There is no limit to resources and getting resources is all about tech. There was a big tech change when the MAC computer came out in 1984. There are structural changes going on currently with tech and the internet.

Everyone thinks oil is past because the price of oil is low. We are in the second year of an oil price collapse. Growth has slowed but it has not stopped. The demand for oil has collapsed. We are in the beginning of a serial glut in oil.

You can make pigs fly by pushing them off a cliff, but in the end gravity will matter. Government policies can change things, but only temporarily. We have one billion cars, in the next decade we will have one billion more cars.

Will future cars be run by batteries or oil? Per pound of batteries, a car can go one half mile. It can go 10 times further on a pound of oil fuel. Batteries will get better and they will improve. We might even triple batteries power and get 2 miles per pound of batteries. There is no path to this currently. However, we can triple miles per pound of fuel to get 10 miles per pound. This is currently possible. So, in the future cars will still use oil.

Yes, the Millennials are part of a sharing economy. However, when they get money, they buy cars. The current economy is just slowing them down.

What about the transformation in electricity from solar. If we can raise the temperature for power plans to 75 degrees we would have power plants that are 3% more efficient. If we can do that to all the power plants in America we would get 1000% more electricity than we get from all the solar power plants we now have in North America. Solar arrays will get better, but they will not get better 1000%. So oil is still going to be used in producing electricity.

Google a few years ago tried to make renewals cheaper than oil. They stopped a year and half ago because the google engineers concluded was that they would need new science to do this. It is not tech with renewables that is changing the world. It is shale oil.

Tech has made shale oil possible. This is manufacturing oil from rocks. The US is now the largest swing producer of oil. There are hundreds of companies in the US that can turn oil off and on in a matter of months or weeks. Shale boom began with oil was at $50 a barrel. Today we have better tech, so there will be a boom if oil reaches $55 a barrel.

Other tech will get better. What matters is how much Capex (capital expense) for energy out. The shale oil companies in the US have improved their Capex by around 400% in the last 5 years. This is a rate of increase 3 to5 times fast than all alternative energy technologies. The shale oil companies can do the same over the next 4 to 5 years.

Shale oil now cost $10 to $55 a barrel and if they just double the efficiencies of their rigs they can improve that to $5 to $25 per barrel. This is bullish for the US and is also bullish for Canada, as Canada has a lot of shale oil fields. He is bullish on oil; he is bullish on North America; bullish on the whole technologies sector and bullish on growth.

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