Bob McNally
Founder & President, Rapidan Energy Group
Author, Crude Volatility: The History and the Future of Boom-Bust Oil Prices
The issues keep coming at us… I think you want to keep a positive attitude, a sense of mission and to treat people well.
Summary
This week on Leadership Matters, Alan was joined by Bob McNally, Founder and President of Rapidan Energy Group as well as the author of the award-winning book, Crude Volatility: The History and the Future of Boom-Bust Oil Prices.
Over the course of their conversation, Bob shared his experiences in both the private sector and civil society. Bob has served in a multitude of prestigious institutions from the Tudor Investment Corporation to the White House. Bob continues to be one of the most highly sought after voices in energy policy. His book, Crude Volatility, has also received numerous awards including the PROSE Awards in Economics.
Mentions & Resources in this Episode
Guest Bio
Robert (Bob) McNally is the founder and president of Rapidan Energy Group, a Washington- and Houston-based energy market, policy, and geopolitical consulting firm. Rapidan Energy Group provides actionable and differentiated data, analysis, and advice to senior risk-managers and decision-makers at financial firms and companies in the energy sector. Bob is the author of Crude Volatility: The History and the Future of Boom-Bust Oil Prices (Columbia University Press, 2017).
Bob’s experience extends from the financial industry to the White House. Mr. McNally started his professional career in 1991 as an oil market analyst and consultant with Energy Security Analysis, Inc. In 1994, he joined Tudor Investment Corporation and for twelve subsequent years analyzed energy markets, macroeconomic policy, and geopolitics for Tudor portfolio managers, earning promotion to Vice President and Managing Director. Mr. McNally served in the Peace Corps in Senegal from 1988-1990. From 2001 to 2003, Mr. McNally served as the top international and domestic energy adviser on the White House staff, holding the posts of Special Assistant to the President on the National Economic Council and, in 2003, Senior Director for International Energy on the National Security Council.
Mr. McNally earned his double major BA/BS in International Relations and Political Science from American University and his MA in International Economics and American Foreign Policy from Johns Hopkins Paul H. Nitze School of Advanced International Studies (SAIS).
He was co-chair for energy policy on the 2008 Romney Campaign, served on the Policy Advisory Committee for Senator Marco Rubio’s 2010 campaign, and regularly advises congressional and administration officials on energy policy and markets. Mr. McNally is a Member of the National Petroleum Council. Mr. McNally has testified to the House and Senate on energy markets and national security and speaks to professional conferences on energy markets, policy, and geopolitics. He has been published in Foreign Affairs (co-authored essay with Michael Levi, July/August 2011) and has been interviewed by CNN, The Economist, Fox Business, The Financial Times, The Washington Post, National Journal, Platts Energy Week TV, PBS’ Great Decisions in Foreign Policy series, Bloomberg News, Aviation Daily and other programs and journals.
Transcript
Alan Fleischmann
I'm joined today by Bob McNally, a veteran global energy expert whose analyses of energy and oil markets made their way from the White House to CNN and New York Times. He's the founder and president of Rapidan Energy Group, an energy consultant for global energy market investors, producers and traders. He's also the author of the award winning book queue vitae a lot is about to start over sorry. I'm joined today by Bob McNally, a veteran global energy expert whose analyses of energy and oil markets have made their way from the White House to CNN, and the New York Times. He is the founder and president of Rapidan Energy Group, an energy consulting firm for the global energy market, investors, producers and traders. He's also the author of the award winning book could volatility, the history and future of boom bust oil prices is expert analysis lead him to frequently be interviewed by Bloomberg, CNN, CNBC, The Economist, NPR, the Financial Times, Washington Post, and of course the New York Times and he is an frequent person testifying around the world, including in Washington before Congress, he has spent his time working in the public sector. From 2001 to 2003. He served as the top international and domestic energy adviser on the White House staff, Special Assistant to the President on the National Economic Council, and as a senior director for international energy on the National Security Council for President George W. Bush. Bob was named among the top 500 most influential people in Washington, by the Washingtonian for his work in both public and private sectors. I'm excited to have Bob on the show to discuss his fascinating background, his incredible career, his journey, and the lessons and leadership he has learned along the way. I would also like to add, he is my college roommate, my dearest friend and a brother to me. And he is truly one of the wisest people I've ever known. So to have him on the show, as someone who advises co CEOs who advises presidents who advise who is a CEO himself, it is all the more fitting to have him on leadership matters, Bob, it's such a pleasure to have you on today.
Bob McNally
Alan, I'm so honored and pleased I've seen the and heard your other interviews and to join that a gust list. I really just can't thank you enough. So thanks for having me on.
Alan Fleischmann
So thrilled, so thrilled to have you on. So let's start a little bit about your early life where you grew up. Where are you originally from? I know a lot of the interests here. So it's always fun for me. So correct me if I don't like them. But we're originally from where you were raised and have a little bit about your father and your mother and your siblings. But your mom just recently passed away. I couldn't help but say she was one of the great, just one of the great human beings I've ever known and someone who wants a walk, not just talk the talk. She was a woman of deep faith. She believed in community, and every life matters. So I will start with your mom. Tell us about your mom. And then of course your parents TV. Thank
Bob McNally
you for that Alan. And yes, my mom was the first leader I encountered among many other things. And I grew up in Central Connecticut and the Hartford area. The product of what back then was called a mixed marriage. My mother is of Sicilian Italian background, my father's Irish. So back then that was mixed. And I'm the oldest of five children. I have two sisters who were adopted from South Korea. So that was an interesting twist growing up and loving them very much. And as you know, at the age of 17, I wanted to get out of Connecticut and head down to Washington where I met you and had made my life in Washington and the Washington area when not abroad. Since then, and as you know, now I split my time between North Carolina and the DC area in Maryland.
Alan Fleischmann
What got you to come to AU– American University would make you spend the four years in college studying international relations and political science. That's a little bit about that choice of Washington and the topic.
Bob McNally
Yeah, you know, I grew up in Connecticut, I still just loved languages. I loved history, especially military history. I've always wanted to learn French and German. And I loved international affairs. So for me, there was only one place to be and that was Washington, DC. I had a general sense. I wanted to make my career in the area of politics and maybe business but certainly politics, international affairs. As you know, I wanted to be a military history professor. But I didn't get rich in the Peace Corps. And so while looking for work to prevent starvation in grad school, and we both went to Johns Hopkins syce I was tapped on the shoulder by a lady who asked if I wanted to count gasoline barrels, and I said I'll count anything you want as long as it pays money on the way to becoming a military professor and As you know, as I graduated their Johns Hopkins sys, I looked at the pay scales of entry level history teachers, the pay scales of oil market analysts, and my pregnant wife, and I decided to go into energy. So my journey from Connecticut into energy was one of drift, not mastery, I have to say, but I'm so glad. I'm so glad about it. Because if you think about it, you know, me, I've never been exactly a math King. abstract concepts of bond derivatives and things don't necessarily come the easiest to me. But boy, I can understand a barrel of oil. And I could understand from my military history, how important energy is to economies, to nations, to geopolitics, and so forth. And so I took to oil because of its inherent political and geopolitical character in a way almost no other commodity has, that's what sort of opened the door to the wonder of not only the oil, but the gas, and then renewables, all energy markets. It's that confluence of markets, and policy, and geopolitics, which drew me to it. So I'm glad I drifted that way.
Alan Fleischmann
I mean, I know many people who have come to you for advice over the years, people who work with you, and your firm. I mean, you're an entrepreneur, you started your own firm. I know, I'm very good friends with Dan Yergin, who, you know, got the Pulitzer Prize for, you know, for what he did for the prize. And, you know, I know that he and so many others look at you as that next generation leader in the field. And a lot of the credit goes to the fact that you, you know, you speak English when you talk, you know, and you get it right. You know, so many folks I know are Paul Tudor Jones and others who've been on the show, by the way, Paul has been on the show. I mean, he would credit you as someone who gets it right. You know, when you say something's going to happen, often when it doesn't look like it would happen. Give us an example of that. I mean, something I mean, I know, there's several examples when, when you said certain things, people looked at you and kind of thought you were coming out of nowhere. And, and, and didn't and they couldn't be and they get and yet it happened. It's happened to us now several times. Give us one example.
Bob McNally
Yeah, well, you know, during the big spectacular oil price collapse in March of 2020. I was in Riyadh, there had just been a disastrous meeting of OPEC plus, and the bottom had fallen out of crude oil prices. And I knew from my analytical work, the price was going to drop to very low levels. And so I was on live TV. It was a Bloomberg interview with Manus Cranny, a fabulous correspondent. We're on live TV. And he said to me, Bob Goldman says, because they always asked you about what Goldman Sachs thinks, you know, Bowman says oil prices could fall to the low of $30 a barrel level and it was about 60. What do you think of that, and I said, manis, the way things are going oil prices will fall closer to three than $30 a barrel. And then there was something you're not supposed to have in live television, a gap. He just was so stunned by what I said that he couldn't even respond. And then after a minute sort of got his composure, and I wrote down that and I kept track. And ultimately, Brent prices didn't get to three, they got what they got closer to three than 30. So I ended up being right on that one. And that caused a gap in the Bloomberg Bloomberg reporting, but you know what that was? Look, I'm what my wife will tell me will tell you, and you certainly know I'm hardly fallible. Here's what I tried to do all my career though, Alan, although I've been in Washington, in and around Washington for all my 30 to 33 Professional years, I was in school before then, remember, except for the Peace Corps, and then working for President Bush for two and a half years. So for five years, I had a political agenda, you could say, I was trying to represent my country and get development jobs done, and the Peace Corps, and I was advancing President Bush's domestic international energy policy in the White House, but with the, for the rest of the time, I was sort of ambassador from Planet market, just trying to understand things, just trying to be objective to predict not to influence and I think that's a rare, and really, I think enjoyable kind of a mission. And it makes you interesting, I think to a lot of folks in Washington, cuz you're used to lobbyists you used to folks who have an agenda. My role was really to say, look, professionally, I'm just gonna tell you what, where I think things are going, I may have my own views about the way the world should be. But if you go, you know, if you do this policy, the market will go that way if you do this sort of thing. And so what I think I've enjoyed and hopefully the reputation I've gotten, and often it will be Democrats who will ask me to testify and not Republicans. Our friend Patrick Kennedy has asked, enjoy a good conversation with him and years ago about energy if they see you as a straight shooter, someone who is capable and able to, you know, look at things objectively and give you their honest opinion about the impacts of various policies and so forth on markets.
Alan Fleischmann
Love that. And tell us a little bit– you mentioned that you touch on the trajectory a little bit. You went to work for Tudor Investment Corporation before you started Rapidan.
Bob McNally
Yes, so after I did grad school, I went to work for a consulting firm called energy security analysis. Sara Emerson, also a science grad, and a friend and an excellent energy expert in her own right. And she's now up in Cambridge. And Ed cradles, her now deceased husband and I sort of cut my teeth. They're learning about how markets work. And after a couple years, I moved on to tutor investment. And Paul Tudor Jones, a friend and remains a client of mine and someone I've worked with longer than anyone else in my career. And a great man and a great leader. Tudor had an office in Washington, whose job it was the sort of if you could keep the traders from being surprised by anything governments did, that affected financial markets, whether it was energy or commodities, or the dollar or bonds or stocks. So I did a lot of macroeconomic work, went to Europe a lot, as you know, spent a lot of time watching the EMU turned into the euro and the ECB and so forth, and then got to know Larry Lindsey, through Tudor who was President George W. Bush's first economic adviser. So through that connection, I was introduced to President Bush on the very first day, literally the first meeting Monday morning, as the guy who was going to fix the California electricity crisis. Of course, I was an oil market analyst. So I had to learn quickly.
Alan Fleischmann
And you I remember this very well, obviously, and you got the job unexpectedly. Were working on the campaign, you were not a campaign person. You were not political like that, even though you are a natural for it, I would argue. And you know, when people say how to get the job of the White House, it was just a job in the White House that had a pretty significant job in the White House. And I got to know President Bush, and he has a nickname for you. He had two nicknames for you. He had a nickname for you at the very beginning. And then unlike most that stuck, he changed his mind. And if I recall, he changed his mind on an airplane on air question at Air Force One light, where he referred to you as your second nickname, and kind of, you know, kind of eliminated the first.
Bob McNally
Yeah, he was so right. It was an Air Force One he gave me. The first one was Light Bob. And that takes some explaining, because he used word association. So he said, someone asked him why Light Bob, and I didn't dare ask him for me. And he said, Well, it's because he's smart, like a light bulb. So instead of a light bulb, it was like Bob, but later, a second nickname came that I actually prefer electric Bob, as opposed to electric bill electric Bob. So you know, in the White House interoffice mail, you get those little envelopes with a little red dot with a little letter inside and I wouldn't be electric Bob. So anyone who knows me in those days would know me as electric Bob.
Alan Fleischmann
So when I talked to people who were in the White House during that time that I mentioned your name that they never say Obama now either we say that your mom. But so you went there. So tell us a little bit about that journey, and the time that you spent both with the NEC and the NSC. So you were part of the National Economic Council, as well as the National Security Council, explain a little bit of what that job entailed, who you interacted with, you did a lot of work, also by recall, with the private sector wasn't just public sector, talking to the states and dealing with international issues, which certainly was a huge part of it. If I recall, you also dealt with a lot of CEOs and a lot of leaders as well.
Bob McNally
Yeah, it was an extraordinary time to be doing energy policy. I referred to it as you know, Enron to Iraq, right. Our largest bankruptcy in history happened to be Enron was involved in all that. The invasion in Second Gulf War 911, the California electricity crisis, we did a major climate plan, a major energy plan. I mean, energy as a policy area can be boring. If you look at say over decades, if you have a two and a half decade career in energy, and you get to experience at the highest level, a war in the Persian Gulf, their use of strategic reserves, massive attack on the homeland, blackouts, bankruptcies. I mean, if you had two and a half decades, you would say to yourself, I've had a great career and energy unusually active. That was my two and a half years. And so I'm very fortunate to have had it. You know, the issues came at us so fast and furious. You know, in the beginning, we hadn't really filled out the administration as I was there on day one, but many folks weren't. So you were dealing with, you know, the California crisis, the energy plan, even 911 Without a filled out staff, but you'll learn quickly. And, you know, I saw I have to say I saw behind the scenes, you know, things that really Press me. from a leadership perspective, I know you're interested in leadership, and that was giving up some thought, when I saw that no one else ever sees when, at least with President Bush, is when they make decisions that are politically hard. So when we had to make a, we had to bring an energy decision to the President. Usually it was if there was division among the staff, and we had to make a call, Mr. President, you know, we want to tee up this issue for you, you're, you're so and so thanks, we go this way. So and So says that way, here are the pros and cons, and he makes the call. But there was one issue that we all agreed on. But it was so difficult politically, we needed to get his buy in. And that was to have federal eminent domain authority to cite power lines, right, the federal government can step in and say, Hey, New York, you can't block, you know, a line from going, or, Hey, Connecticut, excuse me, you can't block a high power line from going from New York to Long Island, they need the power out there. Come on. And so Republicans, you know, don't really enjoy, you know, he had a use of federal power and taking away private property. However, we felt after the California electricity crisis for an adequate grid. You know, in certain cases, the federal government had to have the authority to cite these lines. And so we brought it to him. And we said, you know, this is going to be every Republican is going to hate this, this, this goes against the private sector, private property federalism. But sir, we think it's necessary. And if he's said, if it's necessary for good policy and put it in the bill, and again, that doesn't get published and things, but it's things like that, where you see a leader behind closed doors, you know, make a political, politically difficult position decision. For the benefit of sound policy, I think that's kind of impressive. It's those types of things that I really enjoyed, from my time, behind the scenes there in the White House.
Alan Fleischmann
I mean, a little bit also about your impressions of Congress, because, ironically, you were there during a very contentious time, obviously, or just before. And you were there during 9/11. So a lot happened right after that. You literally were in the White House during 9/11. It was considered at the time, a very, very contentious time. And not a lot of partisanship, more bipartisanship. And yet, looking back, it was a ton of bipartisanship. And there was a lot of collaboration. So it's interesting how the world has changed and shifted in these years. But tell us a little bit about your impressions, both Democrats and Republicans, if you can, without getting too political, and your impressions of some of the leaders in Congress and dealt with?
Bob McNally
Yeah, you know, like you said, so we had 9/11. And after 9/11, there was this period of collaboration and cooperation and unity that we perhaps hadn't really seen since. And that was extraordinary. I have to say, my impression is compared. It's all relative. Right. But back then, you know, I think there were more workmanlike relations, I certainly had with Democratic staff members and so forth, and members of Congress and so forth. I sense there, there wasn't the vitriol, there wasn't quite the polarization. That there is now I think, both parties were in a more moderate place on policy than they were then they are now. Especially with issues of energy. And certainly climate change. We're lightyears away from both parties from where they were 20 years ago on the issue of climate change. So you know, after 9/11, after the California electricity crisis, I mean, folks wanted to get stuff done. And remember President Bush, as I tell folks, we move just about every clean energy policy you can think of personally. I worked on this, I walked us back into the fusion energy program, our energy plan had the first ever residential solar tax credits, we had a hydrogen fuel program. I mean, it was truly an all of the above kind of a policy that President Obama continued to some degree. So there was more common ground. I think, however, after 911, you did see, you know, the vitriol return. And, you know, we didn't get too much done on a bipartisan basis, to be honest there. It was only Republicans who had the Congress that they were able to pass an energy bill and so forth. I will say personally, you know, after the Enron subpoena, I was the number one respondent now. I'm happy to share in this public forum, if anything with Enron, I was Mr. No to them, I was hardly an enabler. They wanted us to do things like deregulate electricity faster. They wanted us to, you know, have regulations on coal so that they could sell more gas. So if anything behind the scenes until they went bankrupt, I was not an enabler or a friend of Enron. If anything, I was like, No, we're not doing this. No, we're not doing that. So when the bankruptcy happened, you know, there was an investigation by Congress and so forth. And the Senate in particular Senator Lehman's committee and yours truly was in the bullseye for there and that was no fun at all. You know, as I am Catholic, so I'm inclined to feel a little guilty anyway, and I knew I was clean as a whistle. However, I didn't like the investigations and so forth. But once it was clear that not only had I not done anything untoward. And if anything, you know, yeah, well, I'll just leave it so that I won't get political. Let me just say I was clean as a whistle, you know, they backed off. And so there was a little frightening moment there. I didn't enjoy it at all. But I guess that comes to the territory. And I have to say, I have a lot of respect for folks on both parties, both parties who work in the White House and then become subject to these types of investigations, you can make a big sacrifice personally and professionally, I got to just a little whiff of that, and it didn't enjoy it. But anyone that takes that role, especially these days, has to take that risk.
Alan Fleischmann
That is one of the unfortunate roles you have when you're in a public life and public position. So you Why did you leave the White House? And you left because you left in the first term?
Bob McNally
Well, my wife, Denise said, you can stay with the President, you can stay with me. It wasn't quite like that. But um, I promised Denise, my wife for two years. And as the two year mark came, we were getting ready to invade Iraq. And the President literally held up the party at the Christmas line, she literally wouldn't let her go after getting our Christmas picture taken. And because he had gotten word that I was going to honor my promise to my wife and leave. And the President lobbied Denise and got six more months. So I was the last one of everyone on the day one, you know, and the National Economic Council from Larry Lindsey to the secretary so the phone to leave. They say the president runs a marathon but the staff sprint and the average lifespan for a senior director of special assistant was 18 months and I made it two and a half years so it was really a return to my family.
Alan Fleischmann
That is the real reason I left and you'll graduate. You wish it's hard to leave where you're sad to leave.
Bob McNally
No, I was ready to leave. I think I was ready to move on. I had done so many scenes. I think I was ready to move on and went back to Tudor this time I didn't do any more macroeconomic work. Paul made me an offer I couldn't refuse. I did all energy all the time, looked at carbon markets as well as oil and gas, you know, made partner and then got to 15 years ago and decided to hang out my own shingle with his blessing, tutors blessing and support and they remain a client to this day.
Alan Fleischmann
Tell us a little bit about the startup rapid and why you called it rapid in what was the purpose of Rapidan. And what does Rapidan do?
Bob McNally
Rapidan is a beautiful River in central Virginia, a tributary of the Rappahannock. It flows out of the Shenandoah mountains. And Denise and I had some land on that river for many years and our kids grew up there and I think you've visited your family and so forth. So it's just a special place to us. And what I did though, is I wanted to set up a camp accompany that did what I had been doing for Paul Jones and George Bush before that is to bring objective analysis and formed research insight at that intersection of markets policy and geopolitics, I call it MPG but not MPG its markets policy and geopolitics. I said it's very rare. Things are getting more volatile in oil markets, policy, geopolitics, the world's going to need more informed veterans, you know, experienced analysts and advisors who really can integrate those three disciplines: MPG markets, policy and geopolitics. So that's what I wanted to do. And I think that's what I've done trying to work myself out of a job. I have a great team of 25 people, ex CIA field officer Scott modell helped build our geopolitical practice, I have a Clean Air Act and environmental attorney running my energy policy service, just a great team of folks trying to execute that mission.
Alan Fleischmann
The position, there is no firm like your firm, that's independent from what I can tell when I talk to CEOs, and I talk to people about what you do and how you advise them. I hear over and over again the same thing, which is there's no there's no firm, it's independent, like yours, and there's no firm that actually is as current as you are, you know, meaning that you deal with what's happening in the moment. But you also lay out you're not afraid to lay out, as I said earlier, what's around the corner? What could be around the corner? For a lot of, you know, a lot of firms, if they do what they do. They're very caveat it, you know, they like to put all the caveats out there.
Bob McNally
Yeah, on the other hand, well, no, there are some fine firms who, you know, analyze oil markets, and then there are other firms that do geopolitical work. What I think makes it Rapidan and unique is that we're sort of a one stop shop, you know, we are under one roof, if you will, or one set of very talented teammates. We do the analysis of the markets, the supply, the demand, inventory, the price, etc. And then we also do the policy to regulate the geopolitical Well, as well. So it's bringing all of that together. Because we know about energy, we know that energy is exceptionally, you know, exposed to and influenced by political and policy and regulatory factors, as well as geopolitical risk, as we see in the Middle East. And with Russia, what's happening. So I think that makes us unique, we have sort of an unrivaled team of experts and former intelligence officials, energy ministry officials, White House officials, as well as analysts. And it's a great fun we have, as we say, plenty of material to work with these days, as you can imagine, it's just raining opportunities in terms of all the mayhem in the world. And but we enjoy that space where we're, you know, we're nonpartisan, we've got right, left and center. You know, we, and when we public, we try and, you know, keep it real, I commend the Biden administration for trying to refill, for example, Strategic Petroleum Reserve, when they do things I disagree with, I disagree occasionally, but it's, it's not, we're not out there just to be partisan hacks, if you will, we're trying to provide something very scarce. And that is objective, reasoned analysis and insight on the most important commodities on the planet, you know, right up there with food is energy, and you need the energy to get the food.
Alan Fleischmann
Wow. So when you describe your point of view, is there a point of view that you bring to energy policy? I mean, when you look at renewables and alternatives, solar, when you look at wind, fossil fuels, nuclear, is there? Is there a point of view that Rapidan has? Or is it that you believe all energy and kind of serve the purpose of your client?
Bob McNally
Yeah, you know, I think there's a point of view. And, but let me just back up when I say that, to get into that a little bit, you know, and this gets back to your question about dealing with members of Congress and other private sector, but also members of the White House staff in the cabinet. If I can see some real public officials, during my time at the White House, I was really impressed with elected officials, I have to say, I'm impressed with how many issues they have to master. I'm impressed with the way they've come up in public life. And they knew and they had thought about coming up with, you know, energy, or they have thought about maybe economic policy or social issues, right. And so if you think about it, officials coming up in public life, by the time they get to the top member of Congress, or a staff, White House, cabinet staff they've encountered in public life that issues are going to deal with, but energy, energy is the one that they probably don't know so well. In other words, energy is probably the most important issue we have, where you can ascend to the top and public life and never having having really encountered it as on the way up, you know, because crises and things happen to few and far between, unless there's a local utility issue anyway. So the point, the challenge we have, then, is that there's, there's not a lot of depth of understanding about this issue relative to other public policy issues, defense and other things, okay. But at the same time, when there's an energy crisis, it becomes a number one thing. So when you have an energy crisis or a problem, it could be a record oil, gasoline, price spikes, and 2022, the California blackouts, etc. What you have is officials making decisions out of both, and I say this, in the kindest way, ignorance, they just literally haven't encountered the issue in a way they have other issues. They don't have fully formed ideas or understanding, yet, there's panic, because it's the number one issue the public wants to problem solve. And that can lead to often bad outcomes. And so the perspective I brought from a lifelong of learning, and I say learning and I'm still learning about energy from Daniel again, and others, but but some experience is one of you know, pragmatism and reason. And I would say this about even my friends who worked for President Obama. You know, when I think of friends like Jason board off, head of the Columbia Center for Global Energy Policy and others, I think we share a similar kind of a sense that often you're you're when you're, whether you're trying to brief an official, or a private sector, person are sacrificial about energy. Often, you have to bring this reason and practicality to it, and it would all boil down to this, our energy transitions take a long time, energy is one of the biggest things we do on the planet, more people more money involved in energy than anything else, right up there with commodity with food production, and then defense or other areas that really suck in a lot of money and people but energy is really important. And we know from experts, it's really difficult to quickly transition off of, let's say fossil fuels 80%. It's just mostly difficult because of the scale of our investment. And when you try to communicate this to folks on the left or right, you know, why we can't snap our fingers and suddenly be free of imports are suddenly be all renewable dependent on our electricity, whether it's on the right or the left, what you get from this combination of ignorance and panic is these irrational aspirations of what we can achieve and how quickly an energy and it's my job and the job of my friends, again, who and I know many Democrats who officials who understand energy is to educate and to explain why energy is a slow boat, you know, it's a slow boat to turn. And we have to be realistic. When we think about how we can deal with challenges, including climate change.
Alan Fleischmann
And you find people willing to have those conversations. More
Bob McNally
and more. Yes, I think there was, I think we had a period Alan between the Paris agreement so 2015, President Obama brought us into the Paris Agreement. But then President Trump took us out, but the world kind of went ahead. And then when President Biden was elected, I think you had the euphoric kind of peak of enthusiasm for the idea that we could quickly transition, you know, to net zero by 2050. And rapidly reduce our dependence on fossil fuels. So I think between 2015 and I'd say, 2021, it was hard to have these pragmatic conversations. But you know, what? Reality? Eventually, it lasts and wind, clean or soft, if you will. And I think since 2021, with the Russian invasion of Ukraine, with the energy price spikes with the political changes away and underway, not only in the US, but also in Europe, even I think you're starting to see a return to a more pragmatic, reasonable discussion on energy, and environment and climate and so forth. So I think we're getting back there slowly. But we did have that moment there where we thought we could sort of skip over history, you know, economics, technology, resource realities, and somehow sort of wave a wand and sort of be off of oil and gas and 30 years. So there was that moment, I think, where people wanted to believe it and didn't want to talk about anything else. And I think the reality is returning.
Alan Fleischmann
Before we talk about leadership, I know you just celebrated your 15 year anniversary, as a firm at Rapidan. And I'm just curious, you know, looking back at the beginning, obviously, you're an entrepreneur, you started your own firm, I was there at the beginning, I watched what you built this global firm over the years, highly regarded, like no other firm that I know, and I think I'm sure there are lessons learned or, or moments of reflection you've had, as you look back over the last 15 years, and building rapid in and this incredible team of 25 people, anything that just stands out that you want to share?
Bob McNally
Well, the only thing I would say, you know, my epitaph will be, you know: “here lies Robert McNally. He was luckier than he deserved”. I really started with my mother, and you, and au and right through ESI. And Paul in the White House. I've just been blessed with the people I've had in my life, including people who've given me great advice, guidance, help, and support and encouragement all the way. And when I look back to 15 years ago, starting out with a one other colleague in a basement of a stinky house that had been converted into law offices and where we are now, I still my thought goes right to my team, both my my long team of advisors and friends, but also the team, I work with a battalion of people. And you know, my mother just knew like you do, how to attract and inspire great people to work together in a positive energy to accomplish something. And that's what we didn't wrap it in. I don't I can't explain it other than I think, just being blessed, having been sort of nurtured by the folks I mentioned in my life, but that's what I tried to do. And there's some serendipity working, it's working. We've got a great team, we have a lot of fun. The issues keep coming at us. And, you know, I'm just just grateful for that. I think you just want to keep a positive attitude, a sense of mission and treat people well. I learned that especially from Paul Tudor Jones, what a gentleman I mean, Paul speaks to the man who would, you know, empty his office Trash Can the way he would speak to his top investor. He's such a gentleman, it's such a model for how to be a leader, but also a winner, you know, and and driven to persist to Excel, but what being a gentleman while doing it, and so, I've tried to emulate the people I've known and, you know, any success I've had is due to the wonderful people in my life, I'd say, that's
Alan Fleischmann
wonderful. You're listening to leadership matters on SiriusXM, and leadershipmattersshow.com. I'm your host Alan replacement. And I'm here with Bob McNally, the founder and president of Rapidan Energy Group, discussing his journey that has taken him in and out of public life as a former top adviser to President George W. Bush, on energy and part of the National Security Council and National Economic Council. Also just as a really smart political person, and a smart business. This entrepreneur who built a global business 15 years ago, and advises some of the most formidable leaders in the private sector that we know. And that's why we have him on the show because he brings different reflections on leadership. He has with great humility, and done some extraordinary things. He's written a great book, as I mentioned, but let's go back to that book, you wrote this book? And tell us a little bit about it. You wrote it, and it's still considered, you know, as valid and as relevant today as the day you wrote it. I mean, I'm totally surprised how many people give you book awards today, you know, for a book that you wrote in, was it now I guess, 2018? Was it? 2017? Yeah, 17, you got it. You got great awards in 2018. But you also just got one in 2023? Well, so the book obviously, as the energy issues become more and more important, and people understand, you know, the future, which becomes more and more urgent, your book becomes more and more relevant. So tell us a little bit about the book itself?
Bob McNally
Yeah. Well, so you know, I felt I had to explain something we haven't seen in modern times. I mean, from 2003. Until 2008, the price of crude oil nearly quintupled. Without a war in the Persian Gulf, ask yourself when in living memory, or since the 1970s Anyway, has the price of oil ever spiked much less than almost five fold? Without a war in the Persian Gulf? The answer is it hasn't. And then in 2014, the price of oil, which had been around $100 a barrel for a few years suddenly fell over six months to $45 a barrel. When has that ever happened? Since the 1970s. Without a recession answer it happens. So we have these two black swans that affected the price of oil, which is the lifeblood of modern civilization. Now, I knew I wanted to explain that I didn't require an explanation of what is going on, because most of us think that the price of oil is basically stable, unless there's a recession that goes down, or there's a war and it goes up. It's behaving more like if I can use a roller coaster metaphor, the Space Mountain, then it's a small world, right? So why I had to answer the question: why that's what I do with the book. And I got to indulge my love of history, because the answers for why oil prices have become so unusually volatile. Meaning by how much they were rising and falling, and why the causes and the amplitude, right? Why you have to look at history. And you have to look before the Arab oil embargo of 1973. Everybody starts their history with that, actually, to really understand what's going on and why we're on a rollercoaster. Why we're on Space Mountain right now, you have to look before 1973 to examine the economics of oil and why it's volatile, and what causes it to be stable. And here again, it led to one of these delicious tensions that I find in public life where I admire leadership. Okay. The bottom line is that you don't get invited to parties in Washington by saying this, but you know, what my book revealed and what history shows is the only thing worse than OPEC, kind of managing the oil market is OPEC not managing the oil market. In other words, if we want to have stable prices for oil, we have to have something that normally makes us uncomfortable, which is a regulator controlling the supply of oil. Now that has been OPEC and OPEC plus since the 1970s. But before then it was the US. And here's the delicious irony. Guess who the king of all oil regulators was the granddaddy of OPEC. Were Texans in the 1930s. We had just had a couple decades of wild crude oil price volatility. And Texas had enough of it. And Texas as we know, I mean, I grew up in Connecticut, but Texas I mean, God put Texans on Earth, in my view to produce oil and limit government yet, in order to bring stability to the crazy oil market of the 1910s and 1920s. In order to protect the economy of Texas to keep oil prices stable. Texas regulators had to resort to such heavy handed government control of oil that would have made a tonne blush. Okay. And they did this not because they liked having the government step in and tell business what to do. I mean, they literally sent troops into the fields to prod the drillers away from their own private property at bayonet point to stop production. And they did that because the only thing worse than that was this wild Kudo. appreciate instant stability. And you know, I talked about 2020 You had Donald President Trump, who had been a big enemy of OPEC. Right, I didn't like OPEC as much as a foe of OPEC. As China, right, if you read his books and his speeches and they're a cartel, they're evil, etc. Well, in 2020, when the oil price was collapsing, as I mentioned earlier, that started to put the US shale business out of business. So suddenly, Donald Trump realized, wait a minute, which would my book show? We need OPEC. We need somebody in there stabilizing the price. And so Donald Trump became an OPEC Achievement Award winner, right and 2020 He actually organized a deal between Russia and Saudi Arabia to get them to cut production. When does an American president as OPEC to cut production to raise prices? Not very often. But Trump did it and so that gets to this tension, if you will, between. And I share this very much a free market orientation toward most things, but an unlimited government. But on the other hand, the reality is that oil prices are wildly volatile, if there's not some sort of Supply Manager and for something as important to oil, which has a big role in our economy and national security. It's just unacceptable to have that kind of volatility.
Alan Fleischmann
And the book did well?
Bob McNally
It did you know? I'll disclose here, I was not a math or economics genius, as you know, I had to pretty much promise my Economics professor that I'd never get a job in economics. To get out of there. I wanted to be a history teacher, but it won the International Association of Energy Economics Book Award in 2023. So I'm sure my professor there was probably rolling over in his grave at that one, but you never know where your life is gonna lead.
Alan Fleischmann
That's amazing. And that book continues to be something you talked about.
Bob McNally
People ask about it, I get a lot of young folks especially. I wrote it for the non energy expert, just someone who's interested in energy, but wanted to understand the oil markets, but it's not written for the oil expert, per se. So I've been asked to lecture and talk about it quite a bit. University professors assign it and have a lot of friends who teach now and say they assign it. And I've had young folks come in, praise it in the highest terms and so forth. And I'm, you know, I couldn't just be I rate endorsements from Dan Yergin and Paul Jones and Scott Sheffield. And I, you know, I'm just very honored. So yeah, it seems to be wearing well so far.
Alan Fleischmann
So we could talk right now a little bit that we won't, about how you publish, and you're interviewed in Bloomberg and foreign affairs, The Economist, Financial Times, CNN, you testify in Congress, you're, you know, in energy markets and policy, we can get into that. But I think we all assume now that's what Bob McNally does. What did they not assume are? No. Is that you are a a big kid, actually, I would argue but you aren't around Washington, for performing in bipartisan local bands, whose members have included several members of the Bush administration. I know Andy Card, who was the former White House Chief of Staff under President Bush and Josh Bolton, another good friend who's been on the show, who's the former White House Chief of Staff under President Bush and also the CEO of the Business Roundtable. Also, I think Dan Panamint, it was Barack Obama's Deputy Energy Secretary and the current Secretary of State, Tony Blinken, I think performed with you all as well. Give us a little bit of background here. I have a little bit I should just declare myself as a fan. And I do as a groupie, I guess. But tell me tell us a little bit about how that all started. And you've always been a drummer. But how did that start? You had many names over the years of your band, I remember they compassionate conservatives is one of them. And then you've changed the name over the years. But tell us a little bit about that. And if that isn't a great example of bipartisanship in Washington, I don't know what is.
Bob McNally
You know, you're right. Thank you, Alan. I am a drummer. I've been a drummer all my life and you're. It's important that your readers know that there is this subculture in Washington of bipartisan energy foreign affairs, intelligence community, rock and rollers and I'm honored and just having a blast being part of it. So it was with Josh Bolton, both of President Bush's chiefs of staff were in my first band. We would always have Secret Service protection. They show up at my house and Bethesda. We always had the Secret Service ringing the house when we practiced. Andy Card played the trumpet and Josh Bolton is a fantastic bass player. And his daughter, Tabitha Mueller was in our band and sang and played keyboards and we still play together. We called ourselves budget Attention Deficit Disorder or bad and then we called ourselves compassionate. We played the South Lawn of the White House twice, and the congressional bank got angry that we got all the press and Josh had to apologize to the members of Congress bipartisan who felt that we showed them up. I have a vision of President George W. Bush, dancing in his gym shorts on the Truman Balcony. While we were warming up before the party started, he was rooting for us as we were, so anyway, my main band and you can appreciate the name sound policy. And we just had a gig and pretty muscular hard rock going on there fabulous. President Biden's National Security Director for climate change in clean energy is our lead singer, Miriam DOnofrio, and she's a powerhouse. Miriam I is also in another band that fights breast cancer called Pink Noise. That's the one with Dan Pantum. And we just had practice. And by the way, we'll be having our next performance in DC. It's either September 3 or the fourth. So stay tuned to Pink Noise and we'll be getting that out on social media. We'll be playing and as you said before he went to Tony Blinken, who's an outstanding guitarist and singer. He's played several times with pink noise when I was a drummer with him. And when I wasn't I got to play with him once. He did some Robert Robert Palmer covers he sang and played, and he's a great musician. I hope we can get them back when we play in September. So yeah, rock and roll and energy is rock and roll I should say and drumming is my is my release from the date.
Alan Fleischmann
Any Washingtonians you haven't had to play with that you want to?
Bob McNally
Ah, I'll have to think about that. None come right to mind that folks are still in Washington. No, I don't think so. I'll have to give it some thought. But one person we're honored to play with is Jeff's gone past Baxter from Doobie Brothers and Steely Dan. We played a fundraiser during the Iraq War, where we were beaming out at Walter Reed and we were playing outdoors for wounded soldiers. And we were beaming our performance to an infantry unit in Iraq at the time and getting to play. You know, China grove with a member of the Doobie Brothers is a great huge honor to play with Jeff skunk Baxter.
Alan Fleischmann
Tell me a little bit about advice you give you know, you're the father of three beautiful young adults. You are the uncle of Jiminy, you are the employer of several. We know when you're looking at this very, very uncertain world right now with all the you know all the fearful things when you think about it from challenges to our climate to challenges to our society to divisiveness, you know, whether you whether you believe one thing or another, you know, what do you tell young people actually? And how do you encourage them to take action to be an entrepreneur, to get involved in public life? Or to be a business person who can, you know, make capitalism work? You know, what are you doing? Or a thought leader? What do you do? And how do you do it? How do you actually figure out what to say to those who may want to follow you and be an entrepreneur or those who look at you from a subsidy point of view and want to jump in the energy field? Or those who look at you as someone who tries to move the agenda of change forward? Yeah, what do you tell young people? Because I would say young people are a lot less inspired by heroes than maybe when you were younger?
Bob McNally
Yeah, well, I want to keep this light and positive here. But as you know, I see things in historical and cyclical terms. And it's just, I think, the case that as you and I sit here in our late 50s, let's just put it that way, without disclosing too much.
Alan Fleischmann
I'm in my early 50s.
Bob McNally
And we look back at our lives. And you know, I think, you know, we have been very fortunate to have lived and what is in retrospect, it didn't seem easy, and carefree along the way. But in retrospect, if you think about the last 40, or even 80 years, or our parents since World War Two, it's been a pretty positive trajectory, in which case, you know, coming up, you and I are generation, you can look to government and see that it did things it won wars, it built highways, sent a man to the moon, it won the Cold War inspired people around the world, the economy was growing. Countries were recovering. I mean, it was easier to both be optimistic, and to share that optimism. But you know, cycles come to an end. And I fear that we're coming to the end of a more or less four generation cycle and you have to go back to World War Two and then 80 years before the Civil War and 80 years before the revolution. I think we're coming to an era where it's going to be difficult. And just as it was for the World War Two generation, your dad's generation where they had their difficult period in their youth. And then as they grew older, they grew into this happier time. I think our children are in a similar situation where it's hard to be terribly out optimistic in the next few years about stability, because these trends that are polarizing us are, are really unstoppable, I think and they're structural, they have to do with the jobs the government has taken itself to do. The entitlement programs, trying to do a lot of things with debt, you know, we've been riding an easy debt wave here for 40 years, interest rates have been going down, inflation has been going down, everyone bipartisan running up the debt. Well, those days are coming to an end. And, you know, the end of the Cold War is ancient history. And the end of the end of the Cold War looks like it's ending. And we have real challenges from China and Iran, and Russia, and so forth. And so, we don't want to talk about what's going on domestically. So, you know, you have to be real. And that's the thing, I don't like to sugarcoat things, you know, that I, you have to be real with your kids and young folks, we are going into difficult times. And this is not a time to be in debt. It's not a time to, you know, be in a precarious situation of any kind. You want to be in friend groups and professional groups and live in a way in which you're living within your means. You have relationships that are important, because during these tumultuous periods, it's about relationships and family, local communities, you know, getting through these things is going to be difficult. And you have to examine your core primitive principles. In some ways, it's a time for young folks. And it's difficult to do when you're young God knows I didn't do it, but to examine, you know, whether it's faith, whether it's history, what's really important in life, because we're going into a bigger period of instability. And what comes out the other side, we really can't predict, it's likely to be very different than then. We know now that was the case 80 years ago, and 80 years before that, and 80 years before that. So I tell them, we're going into a very difficult period. And I may have my own views about what I'd like to see after that. They may differ from your views or other views, we all differ, but nothing's more important, you mentioned uncle, then I think I don't tell so much as try to live by example. I mean, you and Daphna, our uncle Allanon On top of that to our children, and I'm a proud uncle to yours. And I hope I live in our lives and the way we live our lives and where we act, both professionally and personally. We're teaching them that despite what you see out the window. It's not about personal vitriol, ad hominem attacks, people are not bad people, because they have a different faith, different skin culture, a different skin color, or a different political orientation. Just I try and live the life that we have on my firm, right left Maga progressive on my firm, we all get together, everyone works well together, because we all have a mission. And so I try to teach by example, not so much by lecturing, that that's the way to live. And that's going to become more important as the centrifugal forces that I think are structural, their economic, their political, are really ripping apart our country. And then we're going to have to put things back together again. And it's our young kids, we're going to be doing that just as your dad's generation did, after they had to serve in you know, through World War Two.
Alan Fleischmann
So are you optimistic?
Bob McNally
I am, I'm optimistic. But like my father used to say when we'd be driving to Cape Cod, and we'd say how much longer daddy until we get there, he would say, it's going to get worse before it gets better. But yes, I am optimistic. The American story is an upward arc. Condoleezza Rice said, you know, an arc that bends toward freedom. I think we're gonna do the right thing. And I think we're going to come out better. But we're, it's going to be a pretty wild ride between now and then. But yeah, I'm hopeful we got to be optimistic to be an if you're an American.
Alan Fleischmann
What's next on the horizon for you and for Rapidan?
Bob McNally
Well, let's see, I think I do want to think about as we get to the 10 year anniversary of my book, I want to maybe do an update to that, and maybe a new addition with some new material, I'll see how well the thesis is played over the intervening 10 years. So I'm kind of looking at that. I also think that I've been waiting since the 1990s, as you know, to write a book about this cyclical kind of view of history, America 4.0. And its implications for energy, energy and climate policy. So I'm kind of gearing myself up for maybe another book project, but I really want to get Rapidan, you know, we're doing very well and that's taken a lot of my time. And other than that, it's just learning more songs. I mean, especially love the young people in the bands. They're bringing me songs that I never heard about, you know, this new music and, you know, just keeps your brain young when you have to learn a new song and learn a new part and, and so forth. So I just want to keep playing. Keep, keep it, keep on it with energy and maybe write some more and, and see what comes. That's amazing.
Alan Fleischmann
Well, you've been listening to leadership matters. I'm your host, Alan Fleischmann. We've been just spending the last hour with Bob McNally, who is the founder and president of Rapidan Energy Group and is an award winning author. He has a great friend. He's a role model and honestly, he's one of the smartest people I've ever known. More importantly, he's one of the finest people I've ever known and he is a pleasure to work with. We don't always agree on politics. We don't always agree on policy we don't always agree on, on sequencing of things in life, but we do agree on all the things that really matter. And as a leader, I look to him for advice. And as someone who I admire, who gives advice to CEOs and as the CEO himself, he's one of the great shining examples of private ingenuity, private sector, ingenuity, and, and the best and finest people who serve our country in all kinds of ways at that intersection between private public and civil society as a as someone who lives at that intersection every day. I am always grateful for Bob and his advice. So thank you, Bob, for being on the show. You're an example of a great leader you've shared regatta fascinating parts of your journey, and I know your case, the best is yet to come.