We Study Billionaires - The Investor’s Podcast Network TIP491: Macro and the Energy Market w/ Lyn Alden
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Nov 6, 2022 
Lyn Alden, a financial analyst and author renowned for her insights into macroeconomics and energy markets, discusses the intricate relationship between oil supply and economic stability. She explains the boom and bust cycle in the oil market, and Warren Buffett's strategic bets on Chevron and Occidental. They delve into the recent OPEC+ production cuts and their impact on prices, raising questions about inflation targets and U.S. monetary policy. Alden also sheds light on the appreciation of emerging market currencies compared to more established ones.
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Shale Oil Focus on Growth
- US shale oil producers prioritized growth over profits due to new technologies, low interest rates, and investor demand.
- This led to overinvestment and a focus on rapid production, neglecting long-term profitability.
Oil Market Volatility
- The oil market's volatility is influenced by the time lag in adjusting capacity, fixed vs. variable costs, and differing marginal costs globally.
- Oil projects, even if unprofitable overall, can continue due to differences between fixed and variable costs, impacting price cycles.
Oil Market Cycles
- The oil market's boom-bust cycles are driven by delayed responses to price signals and the time it takes to bring new supply online.
- Bear markets are characterized by oversupply from previous booms, while bull markets result from depleted spare capacity and underinvestment.