Some analysts are bullish on oil stocks over the medium term, even with the short-term volatilities we’ve seen over recent weeks thanks all the wars. BBTW editor Peter S. Green spoke with Bob McNally, founder and president of Rapidan Energy Group, an energy intelligence advisory firm, to find out more:

Peter Green: What are the coming geopolitical risks given the Middle East, China, Russia, and Venezuelan political situations?

Bob McNally: The U.S. has been a big fan of sanctioning, but they’re a bigger fan of not having an oil price spike. So I expect the United States is going to continue to have a lax approach towards imposing sanctions that could increase the price of gasoline at home. That means continuing to let Vladimir Putin sell oil to the Chinese, which the Chinese and Russians are loving. It means continuing to let Venezuela sell oil. It means, as President Trump recently said, continuing to let Iran sell oil to China. Whoever is president, Trump or Biden, it doesn’t matter. They don’t want $5 gasoline, period.

Green: With all the turmoil, astoundingly gasoline prices and oil prices haven’t moved significantly. What’s going on?

McNally: Generally, gasoline prices follow crude oil prices, and the relative stability in gasoline prices can be explained by the relative stability in crude oil prices. Let’s talk about the last 15 days. You’ve seen crude oil prices $CL_F ( 0.0% ) go up by $10 a barrel and then go down by $10 a barrel as the market priced in fear of a war in the Gulf that would disrupt energy. Then they priced it out when the fear went away. As crude oil prices in the last couple of weeks went up, pump prices have also gone up but only slightly. The average was about $3.14 per gallon a couple of weeks ago. It’s now about $3.20. So both crude, with the exception of these little wiggles, and gasoline have been pretty stable, and more or less pump prices move with crude. Crude oil has been $60, $70 a barrel for a while now, and gasoline has settled down in the low $3 a gallon range.

Green: How long will this hold? We talk about an energy transition, U.S. oil neutrality?

McNally: First of all, the price of oil depends on supply and demand, which is largely driven by economic activity on the demand side. Are we going to have a recession, a downturn? What’s the trade situation? What’s China doing? And then on the supply side, mainly it’s what is the Organization of the Petroleum Exporting Countries (OPEC) doing? They control supply in the short term with their policy decisions. And what we have now, as we analyze the fundamentals, is that oil prices are probably correctly valued about where they are. Most of us agree that they might be heading down later on this year and next year because economic activity is expected to soften, and that will reduce demand for oil. The big debate is on the medium to long term, three-to-five years, and the transition to renewables, and that’s where things become very interesting and very important. The consensus view is that oil prices should be roughly where they are indefinitely, but there’s a big debate about peak demand. Specifically, are we going to see peak demand for oil in 2030? That is probably the most important question for determining where oil prices will go and what consumers are going to see at the pump. The consensus view advocated by the International Energy Agency is that because of policy-driven fuel efficiency increases in gasoline and diesel cars and policy-driven electric vehicle penetration, that oil demand is going to stop growing by the end of the decade. That would be unprecedented. That would be huge, if it happened. Well, we’ve got plenty of oil. You’ve got shale. You’ve got Guyana. You’ve got OPEC. You’ve got Brazil, and we’re not investing a lot in new oil supply. But they would say we don’t need a lot of new oil supply because demand’s about to flatline here. So the consensus view is, we should expect to see something like where we are now, 60, 70 dollars for the foreseeable future: If we have a recession, it goes down. If we have a war, it goes up.

Green: So you don’t necessarily see oil demand peaking by 2030?

McNally: At Rapidan, we see no evidence that oil demand is on track to peak by 2030 because of efficiency policies and EV policies. What we are seeing right now is weak oil demand. And we’ve seen that in recent years, but not because of electric vehicles, not because of efficiency gains. It’s been because of COVID, like the price spike in 2022, and then economic weakness, especially in China. If we were to have a return to strong economic growth, we think oil demand would rise for the foreseeable future. EVs are coming, but they’re not coming fast enough to kill oil demand. So in our view, we are on a Space Mountain roller coaster of oil price volatility. And we’re going to sort of go through periods of crude prices when they’re booming well above $100 a barrel. And then they’re busting or falling to the 20s or lower. I believe we are in the foothills of a boom cycle. In our view, toward the end of the decade, we’re going to have another kind of a repeat of what you saw 20 years ago, a steady rise in oil prices as demand exceeds supply, and the price will be driven up.

Green: What does that mean for the oil majors who have these vast reserves, BP $BP ( ▼ 0.15% ) , Shell $SHEL ( ▲ 2.18% ), Exxon $XOM ( ▲ 1.64% ), Chevron $CVX ( ▲ 0.81% ) and the like?

McNally: The oil majors suffer during price bust phases, like 2015 and 2016, and they benefit during boom phases. Their profits will rise as the value of crude oil goes up.

Green: So are they undervalued now based on what you think is going to happen in the energy consumption cycle?

McNally: Yes. I believe oil and gas companies are undervalued based on their medium-term profit forecast because the consensus understates demand for oil and for gas, for natural gas as well, by the way. And so, yes, I’ve been telling my clients this is a once-in-a-generation opportunity to buy cheap, underappreciated, unloved oil, both crude production but also refining assets. Now, I want to be clear. We are in a tumultuous near-term period. If we have a recession, if OPEC Plus has another internal fight like they did in 2020 or 2015, oil prices could collapse near-term. And with it, so would energy company majors, refiners. So I’m not saying buy right now. There’s a very large, we call it bearish or downside risk near-term, especially because of the macroeconomic uncertainty. Medium-term, in three to five years, the next big surprise is going to be what I call peak-peak demand, meaning the idea that demand is going to peak will itself peak. And when that happens, everyone’s going to realize we’re structurally short, we’re structurally under-invested in oil and gas, both upstream production and refining. And when that happens, the value of those assets is going to go up. And with it, the value of the majors, integrated majors, in my view.

Peter Green: Thanks, Bob!

[This interview has been condensed. Please note it in no way constitutes financial advice, and is instead an expression of opinion by the interviewee.]

—Peter S. Green

Big Businesses mentioned this week:

$CL_F ( 0.0% ) $DNUT ( ▲ 3.7% ) $MCD ( ▲ 0.05% ) $TGT ( ▲ 0.91% ) $KR ( ▼ 1.37% ) $WMT ( ▼ 1.09% ) $BA ( ▲ 1.85% ) $ALK ( ▲ 0.72% ) $SPR ( ▲ 1.31% ) $SHEL ( ▲ 2.18% ) $BP ( ▼ 0.15% ) $XOM ( ▲ 1.64% ) $CVX ( ▲ 0.81% ) $HES ( ▲ 1.45% ) $PXD ( ▲ 0.73% ) $FANG ( ▲ 2.06% ) $BMBL ( ▲ 0.08% ) $AMZN ( ▲ 2.67% ) $MSFT ( ▲ 1.05% ) $GOOGL ( ▲ 1.29% ) $NVDA ( ▲ 0.46% ) $META ( ▲ 2.46% ) $FDX ( ▼ 0.48% ) $COMP ( ▲ 0.48% ) $Z ( ▲ 1.13% ) $HIMS ( ▲ 12.24% ) $NVO ( ▲ 0.52% ) $LLY ( ▲ 0.36% ) $MWW ( ▲ 1.79% ) $APO ( ▲ 1.26% ) $TSLA ( ▲ 0.11% )

Watch Big Business This Week on Cheddar—and YouTube!The Usual Suspects

• No more donuts for you. Krispy Kreme $DNUT ( ▲ 3.7% ) says it’s leaving the House of Ronald after three years of trying — less successfully than they’d hoped — to move donuts at 2,400 Mickey D’s across the country. Truth be told, there’s not much joy in a cold donut, and the Krispy Kremes sold at McDonald’s $MCD ( ▲ 0.05% ) were never particularly appetizing. They weren’t very profitable either, and that’s what pushed KK’s CEO Josh Charlesworth to pull the plug on the tie-up, saying the doughnut chain was unable to “bring its costs in line with unit demand.” Instead, Krispy Kreme will focus on high-volume retail points including Target $TGT ( ▲ 0.91% ) , Kroger $KR ( ▼ 1.37% ) , Walmart $WMT ( ▼ 1.09% ) , and Sam’s Club, according to Quick-Serve Restaurant News. Krispy has been laboring under $1 billion in debt and saw revenue drop 1%, or $3.6 million, in the first quarter.
• You’re only supposed to blow the bloody doors off (your aircraft): Federal safety regulators said Boeing $BA ( ▲ 1.85% ) was to blame for the door panel that blew off an Alaska Airlines $ALK ( ▲ 0.72% ) 737 MAX last year. The failure set off a chain of events that led to the departure of Boeing’s CEO and the company’s decision to buy back fuselage maker Spirit AeroSystems $SPR ( ▲ 1.31% ) , which it had sold two decades earlier in what was then a clever piece of financial engineering. But the National Transportation Safety Board said Boeing failed to provide adequate training, guidance and oversight in its manufacturing operations. It also said the Federal Aviation Administration failed to enforce its own rules on Boeing’s plane-building operations. “An accident like this only happens when there are multiple system failures,” NTSB chair Jennifer Homendy said as she released the report’s findings. Meanwhile, the FAA says it won’t let Boeing make more than 38 of the 737 MAX planes a month while the jetmaker tries to improve quality control.
• Shell games: Is Anglo-Dutch oil giant Royal Dutch Shell $SHEL ( ▲ 2.18% ) about to gobble up U.K.-based rival BP $BP ( ▼ 0.15% ) (the oil major formerly known as British Petroleum and then, briefly, Beyond Petroleum, and now, well…you know what they say about the energy transition. So it’s plain old “BP,” these days.)? The Wall Street Journal says it’s so, and BP won’t comment, but Shell says the report is just “market speculation.” The Journal is adamant though, and notes that the merger would make it easier for Shell to compete with industry giants Exxon Mobil $XOM ( ▲ 1.64% ) and Chevron $CVX ( ▲ 0.81% ) . Shell’s shares have been outperforming BP, doubling in the last five years, while BP’s are up only a third in the same period. Shell is up about 10% this year, while BP is only up a little over 1%. More importantly, Shell is by far the bigger bruiser: It has a market cap of a little over $200 billion, while BP’s market cap is about $80 billion. Big oil has been trying to consolidate in the past couple of years. Chevron’s $53 billion purchase of Hess $HES is being held up by a legal challenge from Exxon, but Exxon last year paid $60 billion for Pioneer Natural Resources $PXD ( ▲ 0.73% ) , and Diamondback Energy $FANG ( ▲ 2.06% ) recently paid $26 billion for Endeavor Energy Resources with reserves in Texas’ Permian Basin. Shell is aggressively denying its interest this afternoon:
• The Bumble bee stings anyway: Swipe left for the exit. Female-friendly dating app Bumble $BMBL ( ▲ 0.08% ) says it may have reached peak swipe, and is laying off 30% of its workforce, or 240 people. Dating apps make money when people sign up and add their profiles. But too many profiles are overwhelming the algorithms, flooding users with bad matches and driving them off the app. “Dating apps don’t work like social networks, where more people and content automatically make the product better,” CEO Whitney Wolfe Herd said on a call with investors last month. Investors seem to agree. Bumble shares rose nearly 25% after the layoffs were announced. Sounds like an episode of Mobland.
• The Nvidia n-vasion? Roll over Amazon $AMZN ( ▲ 2.67% ) , Microsoft $MSFT ( ▲ 1.05% ) , and Google $GOOGL ( ▲ 1.29% ) . You know Nvidia $NVDA ( ▲ 0.46% ) , those people whose chips you wanna use to power your AI data centers? Well, the company now also wants to be a big player in cloud computing. The chipmaker quietly launched its own cloud-computing service two years ago called DGX Cloud, which has an odd relationship to the Big Three. The cloud companies actually help DGX by leasing it the equipment, including the Nvidia chips, that power DGX’s service. Exactly how DGX grows and how fast will determine if it’s a threat to the big guys. UBS analysts suggested DGX could become a $10 billion business, but Amazon had $107 billion in web service sales last year, The Journal reported. Meanwhile, Nvidia’s share price has recovered from China’s Deep Seek launch and the tariffs, up 64% since April, to hit an all-time high of $154.32 on Wednesday.
• Zuck it to me, baby! As Meta $META ( ▲ 2.46% ) tries to build out its new AI arm, Mark Zuckerberg is taking it personally, firing off emails and WhatsApp messages (on a platform he literally owns) to AI superstars at rival firms, including OpenAI, where he tried to recruit co-founders John Schulman and Ilya Sutskever. Earlier this month, Zuck paid $14 billion for AI startup Scale, putting golden handcuffs on its founder, Alexandr Wang. On Wednesday, he managed to sign three top researchers from OpenAI. Meta has been a laggard in the field. Still, OpenAI CEO Sam Altman said Tuesday that he wasn’t worried about Zuckerberg’s hiring offensive. “It’s like OK, Zuckerberg is doing some new insane thing. What’s next?” he said. Miaowwww. 

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Elon’s World

• You can “bet” on SpaceX now: Investors who want to place a bet on the success of Elon Musk’s SpaceX — even after its Starship craft exploded on the launchpad last week — have a new way to bet: Republic, a crypto-based investment firm, is selling digital tokens that mirror the performance of private shares in SpaceX. The tokens haven’t been approved by any regulators, but Republic CEO Kendrick Nguyen swears they’re legal. At least that’s what he’s insisting on, until the SEC comes knocking. It’s probably fine.
• Market share go crash: Tesla’s $TSLA ( ▲ 0.11% ) vaunted crash-avoidance and self-driving system hasn’t been able to avoid one big crash: Sales. It turns out the Europeans have long memories for familiar arm gestures by the company’s CEO, on inauguration day. Tesla’s sales in Europe fell in May for the fifth month in a row, when the company moved just 13,863 vehicles — down nearly 28% from a year earlier — as its market share slipped to 1.2% from 1.8% last year, even as overall EV sales in Europe were up 27% in May over May 2024. For the first five months, sales are down 37% from 2024.
• China’s star rising? Tesla is setting up its first large-scale battery storage site in China, where an array of Megapacks — the giant storage batteries it’s been producing in Shanghai — will be strung together to ensure grid stability for the Chinese city. The deal is worth about 4 billion yuan ($556 million). The Megapacks will come from Tesla’s own plant in Shanghai, which has produced 100 of the packs in the first quarter, exporting them to Europe and Australia. None have yet been exported to the U.S. because of the tariffs. 
• Look, up in the sky! It’s a bird, it’s a StarLink. No — it’s Amazon! While Musk’s starship was exploding on the SpaceX launchpad, Amazon $AMZN ( ▲ 2.67% ) put its second batch of Kuiper internet satellites into orbit from a more conventional United Launch Alliance Atlas V rocket. The payload of 27 satellites is part of Jeff Bezos’ plan to rival Starlink with a network of 3,236 satellites. The company has an FCC deadline to launch half its total constellation, or 1,618 satellites, by July 2026. Starlink already has 8,000 satellites in orbit.
• Get a whiff of those autotaxis: Tesla launched its first autotaxi service this week in Austin, charging passengers a symbolic $4.20 per ride, in a bid to take on Waymo, the Alphabet-backed self-driving car operation. Shares popped 8% the next day but have dropped 6.5% since. They’re down 14% so far this year.

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Trumplandia

• The Powell Saga continues: Fed Chair Jerome Powell says he’d probably have been able to lower interest rates based on the latest economic data, except for the prospect of tariff-fueled inflation. The big question is how much of the tariff cost businesses will absorb and how much they pass on to consumers in the form of higher prices. Powell’s comments to the House Financial Services Committee followed a week of rage from Trump, who dissed Powell to a group of perplexed construction workers at the White House last week and called on Truth Social for the rest of the Fed to “override this Total and Complete Moron!” and cut interest rates. Powell wouldn’t say when the Fed might cut rates. “Many paths are possible here,” he told Congress. Meanwhile, Trump keeps promising to fire Powell. That’s unlikely to happen as Powell’s term as chair expires early next year, but The Wall Street Journal reports that Trump may consider naming Powell’s replacement as early as this summer, in an effort to embarrass Powell. People being considered for the post by Trump, according to the Journal, include former Fed governor Kevin Warsh, National Economic Council director Kevin Hassett, Treasury Secretary Scott Bessent, former World Bank President David Malpass, and Fed governor Christopher Waller. Powell is likely to stay on as a governor after his term as chair is over, and economists are generally saying even a pro-Trump chair won’t be able to turn policy around and cut rates until a majority of the 12-member Federal Open Market Committee agrees that inflation is really under control.
• Economy go splat? It looks like Americans got nervous as Donald Trump took office, and consumer spending plummeted in the first quarter, the Commerce Dept. said after taking in its final sets of data and making its regular adjustment to GDP estimates. The economy shrunk by 0.5% in the first quarter, down from an initial estimate of a 0.2% shrinkage. Part of that is because data on consumer spending just in showed that despite inflation, Americans spent less than previously estimated, with spending growth up only 0.5% from a previous estimate of 1.2%, the weakest growth rate in four years. Some of that’s due to firms stocking up on goods ahead of Trump’s tariffs, and some has already been priced into the stock market, but if consumers remain nervous, and the economy shrinks for a second quarter, we’ll be in what’s generally considered a recession.
• Ivanka goes to Albania: Presidential son-in-law Jared Kushner and first daughter Ivanka Trump say they’ll invest $1.4 billion to turn an undeveloped Albanian island into a resort for the rich and famous. The island, a Cold War military base, is reportedly littered with bombs and landmines, bomb shelters, 10 miles of underground tunnels, and 3,600 concrete bunkers. The project has the blessing of Albanian president Edi Rama, who told The Guardian newspaper: “We need luxury tourism like a desert needs water.”
• Remember that Trump Mobile smartphone that was gonna be made in America? Of course you don’t: it’s been scrubbed from the company’s website (along with the cell coverage map showing the so-called “Gulf of Mexico”). The Verge first noticed there’s no more wording about the phone being made in the USA. Now it says the device is “Designed with American values in mind.” In China, presumably.

The Short Stack

• You bet! On elections! Prediction markets were correct about the outcome of New York City’s recent mayoral primary, calling the race a day beforehand for upstart candidate Zohran Mamdani even as Andrew Cuomo insisted he had it in the bag. Kalshi, a prediction market that lets users bet on sports games and political events, has raised $185 million in a series C round of investment, which it says values the firm at $2 billion, indicating the strengthening of the global market for wagering. Kalshi got federal approval to allow bets on last November’s presidential election, but despite its Twitter profile slogan, “trade on anything in all 50 states,” it is still battling lawmakers in several states who say local regulation is required.
• FedEx tariff impacts: Overnight package maven FedEx $FDX ( ▼ 0.48% ) says the Trump Tariff Turmoil will cost it $170 million in the first quarter. Most of it from the end of the so-called de minimis provision that exempted goods worth $800 or less from duties and inspections. FedEx cut its service to Asia by 35% in May. The company reported better-than-expected earnings this week, but shares are still down 20% this year.
• Home-sales slapdown: Even as May home sales fell nearly 14% from April, the real estate sales world is engaged in a world-class slap-fest. When broker Compass $COMP ( ▲ 0.48% ) , which sells more homes than any other brokerage, launched an exclusive online channel of 7,000 homes available only to Compass agents and their clients, Zillow $Z ( ▲ 1.13% ) , which makes its money on referrals and tries to carry every publicly listed home sale in the U.S., went ballistic. A few months later, it announced that any home not available for listing on its site within 24 hours of coming on the market would be banned from Zillow forever. Compass has now sued Zillow, saying the listing service is using its monopoly power to enact what it calls the “Zillow ban.” Zillow says hiding listings “undermines a free market.” Now, a New York federal court will sort it out.
• Hims in a heap of trouble: Telehealth company Hims & Hers $HIMS ( ▲ 12.24% ) , that sells ED, baldness, and weight-loss drugs, just got smacked in the mouth: Wegovy maker Novo Nordisk $NVO ( ▲ 0.52% ) abruptly ended its partnership with the company, saying it illegally sold cheaper copycat versions of weight-loss drug Wegovy and said Hims & Hers’ alleged “deceptive marketing” of compounded knockoffs “put patient health at risk.” Hims & Hers responded by accusing Novo Nordisk of pressuring it to steer patients to Wegovy, whether or not it was the best remedy for them. The two-month-old deal was heralded as a long-term partnership that would help Novo Nordisk compete with Eli Lilly $LLY ( ▲ 0.36% ) , whose weight-loss drug Zepbound was being sold through online drugstore Ro. Shares of Hims & Hers were down about 32% since the news broke on Tuesday. Novo Nordisk shares fell more than 8%. Meanwhile, Novo announced it has developed a new weight-loss drug that’s even better than Wegovy. The chemical, called amycretin, helped patients lose over 24% of their weight, compared to 17% for Wegovy, and can be taken as a pill, not just injected. Here’s the CEO of Hims lamenting it all on Twitter:
• Help wanted? Remember when Monster.com was the place to look for a job? Back when jobs were a thing before AI took them all? Well now it’s Monster $MWW ( ▲ 1.79% ) that’s looking for employment. After three decades of rolling up job-searching websites, it merged last September with CareerBuilder, under the ownership of Apollo Global Management $APO ( ▲ 1.26% ) , the asset management firm founded by Jeffrey Epstein’s pal Leon Black. But that didn’t help and it’s now going into Chapter 11 bankruptcy, hoping to salvage some of its businesses. The filing in federal bankruptcy court in Delaware lists assets of $50 to $100 million and debts of $100–500 million. Apollo said it has reached a deal to sell the job board business to JobGet.