Charlie Munger: Is Oil & Gas Industry a Good Business? | Daily Journal 2017 【C:C.M Ep.251】

 

[Transcript]

AUDIENCE MEMBER: Hi Mr. Munger, do you think that domestic natural gas exploration and production is a good business despite the capital intensity?

 

CHARLIE MUNGER: Well, that’s a different subject, I have a different feeling about the energy business than practically anybody else in America. I wish we weren’t producing all this natural gas.

 

I would be delighted to have the condensate that’s coming out of our shale deposits and natural gas just lie there untapped for decades in the future and pay extra a bunch of Arabs to use up their oil.

 

So but that's nobody else in America seems to feel my way. But I’m into deferred gratification. The oil and gas is not going away and I think it’s just as important as the top soil in Iowa. If any of you said, “oh goodie, I found a way to make money, we’ll ship all our top soil from Iowa to Greenland.” I wouldn’t think that was a very good idea.

 

And so I don’t think that hastening to use up all of our oil and gas is a good idea. But I’m practically the only one in the country that feels that way. There’s not enough deferred gratification in it to please me.

 

But I don’t see any advantage, I regard our oil and gas reserves just as chemical feedstocks, they're essential in civilization – leave aside their energy content. I’d be delighted to use them up more slowly. By the way, I’m sure I’m right and the other 99% of the people are wrong.

 

But no, I don’t know – the oil and gas business is very peculiar. The people who success in most other businesses are doing way more physical volume than they did in the past. But a place like Exxon, you know the physical volume goes by by two thirds, it’s just that the price of oil goes up faster than the physical volume goes down. That is a very peculiar way to make money. And it may well continue, but it’s confusing, we’re not use to it.

 

(Source: https://youtu.be/BLctqhNClqY)

 

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