Oil is the ‘most investable space out there’ in the economy right now, says Jeff Currie

Jeff Currie, Goldman Sachs partner alumnus and advisory board chair of the University of Chicago’s Energy Policy Institute, joins ‘Squawk Box’ to discuss his outlook for the commodities markets, top oil and energy market risks in 2024, impact of Fed’s rate path decision, and more.

>>> WELCOME BACK, EVERYBODY. FOR A CHECK ON THE ENERGY MARKETS, WE WANT TO BRING IN JEFF CURRIE, ADVISORY BOARD CHAIR OF THE UNIVERSITY OF CHICAGO’S ENERGY POLICY INSTITUTE. JEFF, GOOD MORNING. THANK YOU FOR JOINING US. AND CONGRATULATIONS ON THE NEW GIG.

>> WELL, IT IS A BOARD SEAT, I’M ALSO ON BOARD SEATS AND THE NEW GIG IS TO CHANGE IN THE NEAR FUTURE, BUT RIGHT NOW IT IS BOARD SEATS. >> LET’S TALK ABOUT YOUR OUTLOOK FOR COMMODITIES MARKETS. YOU’RE BULLISH ON ALL THE COMMODITIES THIS YEAR.

YOU WERE BULLISH LAST YEAR AND DIDN’T QUITE PLAY OUT THAT WAY AT LEAST WHEN IT CAME TO OIL. WHAT HAPPENED LAST YEAR AND WHY YOU TO STILL BELIEVE IN THE SUPER CYCLE? >> LET’S GO AND LOOK AT THIS QUOTE, UNQUOTE IMMACULATE DISINFLATION.

I WANT TO POINT OUT A KCOUPLE O FACTS. ONE, IT HAPPENED GLOBALLY AT THE EXACT SAME TIME. IT IS GLOBALLY SYNCHRONOUS DISINFLATION. SECOND POINT IS COMMODITY DEMAND, OIL DEMAND, RECORD LEVEL, U.S. ECONOMY BOOMING, SO WHAT DOES THAT TELL YOU? IT HAS TO BE SUPPLY DRIVEN, NOT

DEMAND DRIVEN. THEREFORE IT CAN’T BE MONITORED, IT CANNOT BE FISCAL POLICY. IT IS REGULATORY EASING. POLITICIANS TURNED A BLIND EYE ON THE SANCTIONS IN PLACES LIKE CHINA, THAT LED TO A MILLION BARRELS PER DAY, PLUS, OF ADDITIONAL OIL FROM IRAN, VENEZUELA, RUSSIA. THEN THE SECONDARY SANCTIONS

DEBOTTLENECKED SUPPLY CHAINS, MORE FERTILIZERS, MORE ENERGY, MORE FOOD, AND THIS ALL PUT DOWNWARD PRESSURE ON OIL AND COMMODITY PRICES. SO, THEN THE SECOND POINT IS WE SAW THE WORLD LAST YEAR TURN A BLIND EYE TO ENVIRONMENTAL POLICY. THEY TURNED AND DID AN ABOUTFACE.

WHETHER RECORD OIL CONSUMPTCONS RECORD COAL CONSUMPTION, DEFORESTATION, CUTTING DOWN PALM GROVES, YOU GOT MORE FOOD OUT OF IT. WHEN I THINK ABOUT WHAT HAPPENED HERE, WE OVERESTIMATED THE WILLINGNESS OF POLITICS AND POLITICIANS IN THE WEST TO PURSUE THEIR POLITICAL GOALS, DEGLOBALIZATION, DECARBONIZATION AND DISTRIBUTION POLICIES.

AND BECAUSE OF THAT WE ENDED UP WITH MORE SUPPLY. >> JEFF, LET ME JUST SAY ON THAT FRONT, THOUGH, WE — POLITICIANS DID WHAT THEY NEEDED TO DO I THINK FOR THEIR ULTIMATE GOAL, TO STAY ELECTED, GET RE-ELECTED. WHEN PRICES SPIKED AND CONSUMERS

SAID WE ARE NOT PAYING FOR THIS, THEY TURNED A BLIND EYE, YOU DON’T HAVE CONSUMERS SO MAD THAT THEY’RE PAYING SO MUCH AT THE PUMP OR THE GROCERY STORE. THEY SAID, OKAY, WHATEVER IS GOING TO GET MORE FOOD AND ENERGY TO THE TABLE OR INTO YOUR

PUMP MORE CHEAPLY, THEY’RE GOING TO GO AHEAD WITH. WHAT MAKES YOU THINK THEY’RE GOING TO CHANGE THEIR MINDS THIS YEAR? >> BY THE WAY, THE VIEW I THINK IS AS SOON AS YOU HAVE INFLATION, EVERYBODY IS HAPPY AGAIN. THEY’RE GOING TO TURN GREEN AGAIN.

AND THEN LOOK AT THE IMPLICATIONS OF INFLATION IMPAC EVERYBODY’S HAPPY AGAIN THEY’RE GOING TO TURN GREEN AGAIN. AND THEN LOOK AT IMPLICATIONS OF ALLOWING IRAN TO PUMP AN EXTRA, YOU KNOW, 80,000 BARRELS PER DAY? THERE IS HOUTHIS TAKING SHOTS AT U.S. WARSHIPS IN THE RED SEA.

THERE’S A COST TO THIS. SOON AS INFLATION SETTLED, MORE LIKELY THAN NOT, YOU’RE PROBABLY GOING TO SEE A FLIP ONCE AGAIN. MAYBE NOT ALL THE WAY BACK, BUT WE’RE LIKELY TO SEE EVERYBODY BECOME MORE GREEN AND MORE FOCUSED ON SOME OF THESE SANCTION ISSUES, BUT RIGHT NOW,

IT BOTTLENECKED THE SYSTEM, CREATED EXCESS UPLINE AND PUT PRESSURE ON COMMODITIES. I ARG GREW, NOT POINTING THE FINGER, BUT THAT’S AT THE CORE WHY WE WERE SO WRONG. A LOT MORE SUPPLY, POLITICAL OIL, YOU KNOW. CARBON-BASED COMMODITIES. GOT A LOT MORE OF THOSE LAST

YEAR THAN WHAT WE THOUGHT YOU WOULD GET AND I DON’T THINK WE WERE AFLOWN THOSE ASSUMPTIONS OVER A YEAR AGO. >> SURE. >> SO I THINK THE BIG QUESTION GOING FORWARD IS, OKAY. WHAT IS THE OUTLOOK LOOKING LIKE GOING FORWARD? THREE POINTS TO EMPHASIZE THERE.

>> CAN I JUST ASK, BEFORE WE LOOK FOR THE OUTLOOK GOING FORWARD, I MEAN, WOULDN’T THAT ALWAYS BE THE CASE? THAT THERE’S ALWAYS GOING TO BE — WHAT PLAYED OUT LAST YEAR, POLITICIANS SAYING, THERE’S A LIMIT WHAT WE CAN EXPECT CONSUMERS TO PAY.

WOULDN’T THAT ALWAYS PUT A BIT OF A SEALING ON COMMODITIES PRICES? THE IDEA OF A REAL SUPERSPIKE KIND OF GETS OUT OF THE WAY, BECAUSE POLITICIANS EVERYWHERE ARE GOING TO DO EVERYTHING THEY CAN TO KEEP THAT FROM TRULY HAPPENING?

>> LET’S, YOU KNOW, GO BACK TO, LIKE, ’07, ’08. A SUPER SPIKE OCCURRED BUT IT DIDN’T FILTER INTO BROADER INFLATION. WHAT GOT POLICYMAKERS SO FOCUSED ON COMMODITIES THIS TIME AROUND IS IT FILTERED IN TO THE BROADER INFLATION MIX. >> AND I THINK YOU’RE BEATING

YOURSELF UP A LITTLE TOO MUCH HERE, BECAUSE IF 73’S BOTTOM OF THE CYCLE THAT’S NOT TOO BAD, FOR BEING BULLISH ON OIL PRICES, BECAUSE I REMEMBER 48 AND I REMEMBER 10! I WAS A REPORTER WHEN IT WAS $10 A BARREL. IF $73 IS THE BOTTOM.

>> I REMEMBER ZERO FROM 2020. >> FORGET ZERO. >> REMEMBER, NEGATIVE BACK IN APRIL OF ’21. >> I — SORT OF ON THE SUPER CYCLE TRAIN, BUT THE IDEA THAT 72 BEING BOTTOM IS NOT TOO SHABBY IF YOU’RE BULLISH THIS COMMODITY? >> NO.

BY THE WAY, IT IS THE MOST INVESTABLE SPACE OUT THERE IN THE ECONOMY RIGHT NOW. RETURN ON CAPITAL EXCEEDS 20% IN MANY PARTS OF THE WORLD. BACK IN POINT IF THIS IS THE LOW POINT, AND WE’RE UNDERINVESTED GOING FORWARD. SO, YOU KNOW, TO ANSWER YOUR QUESTION.

IS THIS A COMMON OCCURRENCE? I THINK THE PROBLEM IS LIKE THE BOILING FROG. IT HAPPENED TOO QUICK, TOO FAST, WENT UP TOO HIGH, HIT THE CONSUMER, AND THE BACKLASH FROM GOVERNMENTS AROUND THE WORLD WAS SIGNIFICANT. I MEAN, I LIVE HERE IN THE UK

AND THEY DID AN ABOUT-FACE ON THEIR GREEN POLICY. I THINK WE’LL SEE THE GREEN POLICY RESURFACE AND BECOME AN IMPORTANT DRIVER. BY THE WAY, WE’RE TALL ABOUT THIS IN A SECOND. GREEN POLICY IS FULL STEAM