15 Takeaways from Doomberg on Talking Markets

The iconic green chicken had a lot to say - about a natural gas revolution, the end of OPEC, the end of the EU, why Texas may be a new AI hotspot, and more.

The AI revolution will drive a surge in natural gas demand on the way to a renormalization of nuclear,

Doomberg

told me this week on Talking Markets. This conversation was provocative, insightful, and definitely had lots of food (chicken feed?!) for thought.

Here are 15 key takeaways.

1. OPEC on the Ropes

“OPEC has probably been the most effective and long-standing cartel in the history of cartels,” Doomberg said. “They’ve done a truly amazing job of keeping the price of oil much higher than technology would otherwise have it.” However, he added that despite OPEC’s efforts, the price of oil as measured in ounces of gold has basically never been cheaper, and that “OPEC, kind of under the radar, is falling apart.”

2. We’re Awash in Hydrocarbons

“It's undeniable that right now we're swimming in hydrocarbons,” Doomberg said. “The oil markets are very well supplied despite OPEC’s attempts to keep supply offline in an effort to prop up prices.” He added: “Our view is that the market isn't actually pricing in much in the way of geopolitics, because if they were truly concerned about a breakout of war in the Middle East, I think we would be in the 90s.”

3. The Equilibrium Price of Oil Would Be $58-$60 a Barrel

The Doomberg team has calculated that the equilibrium price of oil, “all things being equal, no wars, with the economy humming along” would be $58-$60 a barrel.” But, he added, it’s important to remember that while you can calculate where energy prices should be, “it doesn’t necessarily mean they will go there or stop there.”

4. October 1 May Have Changed the Middle East Landscape

Doomberg said the missile attacks by Iran on Israel on October 1 shifted the strategic landscape of the Middle East. He says numerous missiles penetrated Israel's air defense systems and struck military targets, leading to a situation akin to mutually assured destruction. This new reality, Doomberg argues, is the reason Israel hasn't launched a large-scale counterattack. He also finds it telling that the US is sending advanced anti-aircraft systems to bolster Israel's defenses.

5. AI is About to Eat the World’s Energy

AI has an insatiable need for energy and that’s only going to increase, fuelling an energy revolution, Doomberg says. At Doomberg, they developed a mental model around the Kurzweilian, exponential growth in computer power type analysis. It states that “the economy can be modeled as though it will always do what it takes to keep humanity on that exponential growth of computing power curve.”

6. Nuclear’s a Savior...

With vastly accelerating, AI-driven energy needs, Doomberg says “a nuclear renaissance is needed.” “Computing needs in particular [will] necessitate a renormalization of nuclear power,” he said. “There really is no alternative to nuclear.”

7. ...But Natural Gas Will be the Bridge to Get Us There

There’s one critical flaw with nuclear - it’s damn slow to bring nuclear plants online. So, Doomberg thinks “the bridge to nuclear will be the burning of natural gas.” “The only technology on the board that is relatively cheap, clean-burning, relatively abundant, and can be brought online very quickly is natural gas powered turbines,” he said. “It might be that the molecule we couldn’t give away a few months ago will be the most valuable one on the board.”

8. Texas a New AI Hotspot?

Doomberg predicts that Texas, with its vast natural gas reserves and business-friendly regulations, is poised to become a major center for massive, data-crunching AI compute farms. “It’s very easy to see that Texas will soon become an epicenter of AI compute farms,” Doomberg said. And worldwide, big tech companies are already collocating to natural gas-rich countries like Malaysia and Saudi Arabia.

9. Sorry, Environmentalists

Doomberg says AI's energy demands are going to force a reevaluation of environmental priorities, with natural gas and then nuclear being rebranded as acceptable, especially when compared to coal. “Money talks and nobody has more money or political power than the big tech companies,” Doomberg said. “We’re about to find out how much big tech companies really care about climate change.”

10. China’s Playing Chess, the US is Playing Checkers…

Doomberg paints a bleak picture of US dependence on China for critical materials, especially in the context of growing geopolitical tensions. He says that China has strategically positioned itself to control key nodes in global supply chains, including rare earth metals and solar panel components, leaving the US vulnerable.

11. ...Which Means “Tough on China” Is Just Political B.S

Doomberg calls out politicians posturing about being “tough on China,” saying it’s just empty rhetoric designed to score points with voters. We’re addicted to cheap Chinese goods and utterly reliant on their supply chains – talking tough won’t change that. “It’s happy talk,” Doomberg said. “It’s not the stuff of serious people.” “Either we get nice with China or we swallow an awful lot of medicine,” he said later. “We are still under the illusion that we’re the only global superpower.”

12. The US Needs a Manufacturing Renaissance

To counter China's dominance and secure its national interests, the US needs a major revitalization of its domestic manufacturing capabilities, Doomberg says. This will require a fundamental shift in priorities, focusing on national security rather than short-term corporate profits. “Military might is a derivative of industrial might, and industrial might is a derivative of your ability to harness the necessary commodities that drive the economy,” he said. The recent longshoreman strike may be a sign of things to come, and could be a potential turning point in the balance of power between labor and capital.

13. US Dollar Too Strong?

Doomberg says the strength of the US dollar makes it difficult for American manufacturers to compete globally. “It’s hard to see how a [manufacturing renaissance] happens with the US dollar as strong as it is,” Doomberg said. “I think a significant devaluation is needed to make US manufacturing competitive again.”

14. The West’s Media is Failing Us

Doomberg criticizes the Western media for failing to engage in honest discussions about the trade-offs and consequences of geopolitical decisions. “There is no discussion of trade-offs, there’s no honest account of choices, what they mean, and what we should do collectively,” he says. He sees the rise of independent platforms like Substack as a response to this lack of nuanced and critical analysis.

15. The End of the European Union?

Europe will not be able to “avoid the long-term consequences of their energy policies, which are causing a highly predictable de-industrialization,” Doomberg said. “And that’s only going to accelerate because they simply don’t produce their own energy.” He added that “energy vassals can’t project military power” and that “physics will be the undoing of the European Union, and soon.”

To watch the full episode, right this way.

Enjoy,

Maggie

Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and determine if an allocation to oil aligns with your overall financial plan.