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'The entire sector has been entirely left behind': Dan Dicker on energy

Dan Dicker, The Energy Word Founder and 'Turning Oil Green' Author, joined The Final Round to discuss the state of the energy sector, his outlook, and the risks facing oil companies.

Video Transcript

MYLES UDLAND: After crude oil went negative back in April, things got kind of normal in the energy world. We haven't focused too much on crude oil the last couple of months. But a man who is never sleeping on the energy markets is Dan Dicker. He's the founder of "The Energy Word." He joins us now to discuss what is going on in the energy space?

Dan, we had a hurricane late last week, didn't seem to be a big mover for the markets. But crude right now sitting in the mid 40s, kind of where we left it pre-pandemic, if that makes sense. What stands out to you, if anything, in the market right now?

DAN DICKER: You know, I sit here and I hear you talk about Tesla in one section and you go on to Virgin Galactic, and I feel so quaint. I feel like such a such a dinosaur talking about, you know, stuff that, actually, you know, moves economies and makes things work, like oil. Clearly, the entire sector has been entirely left behind. It hasn't participated at all in this stock market rally. It's the one sector, I guess, along with retail, that's representing reality of demand and supply fundamentals.

And because of that, it's been pretty lousy to be a, you know, an energy investor here. One of the few things I could say to people out there is that the only way that you can buy energy equities, which is, obviously, I still do, is if you don't believe in, you know, a 29x forward earnings number for the S&P and you feel there'll be a reckoning at some point with some of these overrated, overhyped, and enormously high-priced stocks. In which case, almost by default, you'll have some fallback or retrenchment into those blue chips that have been so strong over the course of decades.

And I'm not the Johnny-come-latelys, like Exxon, and Chevron, and Schlumberger. But that's about the only positive thing I can say. You have to be positive about energy stocks, only if you're negative about the general outlook on the stock market and where it's pricing right now.

MYLES UDLAND: Yeah, I mean, I think, you know, some people might make the argument that if growth were to surprise, you would see a benefit to some of the cyclical names, like in energy, and that market negative could be economy positive. But just to pick up on something you were talking about with respect to the individual companies, of course, today, Exxon leaves the Dow, almost unthinkable--

DAN DICKER: Right.

MYLES UDLAND: --seven years ago.

DAN DICKER: I'm ready-- I'm ready to cry. It's like the end of an era. I tell you, I feel older all the time. That's like un-American, isn't that? You can't throw Exxon out of the Dow.

MYLES UDLAND: I mean, Dan--

DAN DICKER: They're crazy.

MYLES UDLAND: It was the biggest company in the world seven years ago.

DAN DICKER: For a long time.

MYLES UDLAND: And, now, it's out of the Dow. I guess, does that speak to how much things have changed in the energy sector? Or is it really an Exxon-specific story in your view?

DAN DICKER: No, no. I think it's a sector-wide thing. I mean, you see everybody and his brother just bailing from oil and energy stocks in general, except, of course, for those alternatives, which are already overhyped. You know, I-- we have a pretty big position in First Solar, which makes sense. But Tesla, again, as a proxy for an alternative energy type play, has been insane.

So there is this forward kind of look into alternative energy as opposed to traditional energy. But, again, you know, my book, which is coming out very soon, makes it very clear that I think that, you know, you only build off of alternative energy by leaving that base of traditional energy unhurt and unharmed. And for that reason alone, I think it continues to have value for many decades to come.

That being said, it's got none of the hype. And it's-- everybody's ignoring it. And, you know, it's just a dinosaur sector.

MYLES UDLAND: So let's talk a little bit more then kind of about the book and that thesis, what's called, "Turning Oil Green." We've seen a lot of announcements-- I think there was one a couple months ago from BP about their ambitions. I think they're-- I think they said they want to be carbon neutral, which is crazy because they make oil, they drill for oil.

So I don't really know how you become carbon neutral if that's your business. But it would seem that, you know, your Royals, BP, Exxons, they have no choice, right, but to try to find a way to say, no, no, no, we are actually leading the clean energy revolution. Otherwise, it sounds like there's really no future for them as traditional oil majors.

DAN DICKER: And there's been a demand from stockholders as well to be more receptive to green energy development. In the book, I posit that they have to be brought along. In fact, you cannot, in fact, move smartly towards renewable future without having the traditional energy companies on board. They understand the infrastructure. They understand how to get it, how to move it, how to-- how to deliver it to consumers better than anybody else in the world.

And to try and restructure an entire energy infrastructure without using what's already there and available with energy companies, I think is insane, especially if you want to move towards a green future as quickly as you possibly can. So in the book I have a number of suggestions on how to do that. So I won't give it away, so someone will buy it besides, you know, my mother. But I think that in all ways, that traditional energy must play a part in even a completely carbon neutral future, which is what we inevitably will get to.

MYLES UDLAND: And then, Dan, quickly before I let you go, we haven't talked all that much during the pandemic. I think one of the most recent times we spoke is when oil had gone to negative $40 a barrel. Just as we look back on that moment, do you have any more clarity on what exactly happened? Does it seem more sensical to you now? Does it scare you, I guess, about the market structure that that was able to happen kind of at that moment?

DAN DICKER: You know, as a-- you know, as a postscript to everything we've just discussed, there is, you know, this kind of obsolescence that attends the energy sector and the markets that control them, including those future markets. And the one-off, that was that negative pricing, is, clearly, a piece of what has been a bankrupted system among energy companies in one place and the energy markets in another place. Again, I talk about this in my book to a certain degree. There is a need to move forward. A lot of these structures have proven in the coronavirus how obsolete and how kind of bankrupt they always-- they have been and have been continuing to get.

And so I think that, you know, again, as an axillary to what we've already been talking about, this is-- that's what I take away from that. It was coronavirus put everything into hyperdrive. If there was something that was bad, it became immediately awful. And the energy markets were always sinking towards something that was going to not work out in the end. And those negative prices proved that in a hurry. That's what, I think, I take away from that, Myles.

MYLES UDLAND: All right, Dan, I think this is the most downbeat analysis that we've ever had on the future--

DAN DICKER: Hey, man--

MYLES UDLAND: --of the energy the business.

DAN DICKER: --it goes with the beard. What am I going to tell you?

MYLES UDLAND: [LAUGHS] All right. Dan Dicker is the founder of "The Energy Word," author of the forthcoming book, "Turning Oil Green." Dan, always great to get your thoughts. We'll talk to you soon.

DAN DICKER: Thanks, Myles.