Thursday Night Links

• Energy ignorance, defined as the lack of knowledge of how oil is used and the likely time frame for alternatives to displace it, has warped the market’s sense of what barrels of oil to be produced years into the future should be worth. That misinformation has convinced many that the end of oil is at hand, peak demand lies only a few years away and energy stock valuations have collapsed. So much so that several years ago, before the rise of Tesla Inc. and environmental, social and corporate governance (ESG) investing, energy stocks used to trade at approximately seven to nine times their annual cash flow while today they trade at a measly three times or less. The result is that energy stocks are trading at barely the value of their existing production stream, getting zero value for future production and the commensurate cash flow it will generate. Why place any value on production five or 10 years into the future, some ask, when oil demand will soon peak and the oil price will collapse? [Eric Nuttall]
• U.S. shale lacks the capacity to come to the rescue of consumers battling sky-high energy prices with much more crude production, says the boss of the Permian Basin’s biggest oil explorer. Only OPEC countries like Saudi Arabia and the United Arab Emirates have the ability to meaningfully increase production fast in the wake of supply shortages, Pioneer Chief Executive Officer Scott Sheffield said on Bloomberg TV. U.S. shale, the world’s oil growth engine for the past decade, is constrained by labor shortages and demands by shareholders to return cash, he said. “Several other producers are having trouble getting frack crews, they’re having trouble getting labor and they’re having trouble getting sand; that’s going to keep anybody from growing,” Sheffield said. “If the president wants us to grow, I just don’t think the industry can grow anyway.” Surging oil prices that many on Wall Street now expect to reach $100 a barrel have been a major cause of concern for governments confronting voter discontent over a higher cost of living. Most notably, U.S. President Joe Biden, has criticized American drillers for not producing more and has released crude from strategic reserves in a bid to ease gasoline prices at the pump. [Bloomberg] 
  
• Heineken’s chief executive has warned that “off the charts” cost inflation will further push up the price of a pint and said the risk of outright shortages was growing as brewers face persistent challenges delivering beer to pubs, restaurants and supermarkets. Dolf van den Brink told the Financial Times that it was impossible to gauge how much consumers would reduce consumption in response to additional price rises, adding that the usual models the sector used to try to predict behaviour were breaking down. [FT]
  
• Altria Group Inc. didn’t break antitrust laws when it took a large stake in e-cigarette startup Juul Labs Inc. in 2018, an administrative law judge ruled. [WSJ]
  
• Cliffs’ announcement during its February 11, 2022 earnings call follows comments made by Cliffs’ CEO on October 22, 2021, about its plans to shift DR-grade pellet production away from Northshore and into Minorca, making Northshore a swing operation and idling the Northshore operations from time to time. Cliffs has not notified Mesabi Trust of any of the aforementioned operational changes. Further, Cliffs has not recently requested any changes to the royalty structure, which is governed by a 1989 royalty agreement,  and Cliffs has historically failed to engage in meaningful negotiations requested by Mesabi Trust to address the interpretations of the royalty structure. [MSB]
• There is a common misconception that lender liability is a thing of the past.  However, a recent decision provides a warning to lenders that they can be held liable and face substantial damages if they exercise excessive control over a debtor’s business affairs. In Bailey Tool & Mfg. Co. v. Republic Bus. Credit (In re Bailey Tool & Mfg. Co.), 2021 WL 6101847 (Bankr. N.D. Tex. Dec. 23, 2021), the Dallas bankruptcy court found a lender squarely at fault for its borrower’s bankruptcy and subsequent liquidation and liable to the borrower’s estate under various breach of contract, tort, and bankruptcy theories.  The lender’s damages were substantial, including the full enterprise value of the debtor’s legacy business and anticipated new business, lost profits, all of the debtor’s administrative expenses, punitive damages, attorneys’ fees, and more.  The lender was also liable to the owner/guarantor for additional amounts, including exemplary damages. [Weil, Gotshal & Manges LLP]
• By foregoing a solid axle, Ford gave up a bit of rock-crawling capability while gaining a ton of high-speed desert-running skill. The Blue Oval gave up the top spot in rock crawling (where the Bronco still does quite well) in order to dominate the desert running (where the Wrangler doesn’t perform so well). Obviously, there were some reasons beyond “Why be equal or slightly better than the Wrangler at rock crawling when we can be a little worse at that but much, much better at high-speed off-roading.” The basic platform on which the Bronco is built — shared with other vehicles like the Ranger and Everest — lends itself to independent suspension, so you can bet that saving money by using a common suspension architecture played into the IFS decision. But even if the dollars and cents weren’t a factor and the Bronco had been a clean-sheet design, I think IFS would still have been the right move. As I learned a week ago, the machine is a beast in the three most critical areas of desert-driving — high-speed running on lake beds and washboard roads, hill and dune climbing, and donut-ripping. [Jalopnik]
  
• As much as we’d love to believe this is common knowledge (as it is on this website), there are plenty of regular people who think “ooh cheap car that will make people think I’m rich” and forego any critical thinking. This car is all but destined to end up going to someone like that, or possibly a MB enthusiast and backyard mechanic who is willing to undertake the maintenance themselves. IMO it is universally worth spending a bit more for a nicer one if you’re looking at any kind of older car, with the possible exception of track cars where you plan on replacing everything yourself anyways. If you can’t afford $20k for an ultra clean S-class, you certainly can’t afford $10k for a questionable one. [Jalopnik]
• There is reason to believe that cigarettes will always provide a superior experience to vaping, at least for a core group of users with a certain brain chemistry. Cigarette smoke seems to contain a psychoactive ingredient other than nicotine that reinforces the effects of nicotine. It appears that certain alkaloids in the cigarette smoke are able to inhibit an enzyme called monoamine oxidase that breaks down the neurotransmitter dopamine. Researchers have found that MAO levels are reduced in the brains of smokers. It is even possible that some smokers are using cigarettes for the MAO inhibition more than for the nicotine. The aerosol fractions from heated tobacco and e-cigarettes do not inhibit MAO activity. And so far no one has tried to engineer these compounds into vaping fluid to fully match the cigarette smoking experience. Like cigarettes, the vapes on the market today are "grandfathered in" by the FDA, and it is doubtful that anyone would be allowed to make a significant change to the chemistry of vape fluid. So cigarettes will likely have a monopoly on a certain type of synergistic dopamine experience and chemical modulation of certain neurotransmitters. [CBS]
• The fiat foods outlined by Saifedean Ammous include: Polyunsaturated and hydrogenated ‘vegetable’ and seed oils – soy, canola (rapeseed), sunflower, corn oils and margarine. Processed corn – including high fructose corn syrup. Soy including soy lecithin. Low fat foods – including fat free and skim milk. Refined flour and sugar – including processed carbohydrates like breakfast cereals and white breads. [rootcausemd]
• A private library of good size is an insolent form of riches, and the desire to have more books is difficult to rationalize, especially in view of the fact that you do not or cannot read them all but, as Bonnet makes clear, still you might. The bibliophile is, after all, like a sultan or khan who has countless wives already but another two or three are always irresistible. Reading is a pastime and can be regarded as such, but it can also be supremely important. Walter Benjamin expressed it off-handedly; he read, he said, “just to get in touch.” I take this to mean in touch with things otherwise impossible to embrace rather than merely stay abreast of, although a certain ambiguity is the mark of accomplished writers. [...] Books, as Bonnet comments, are expensive to buy and worth very little if you try to sell them. The fate of a private library after the death of its owner is almost always to be scattered. [New Yorker]