A Contrarian's Take: AI's Electricity Problem and the Bull Case for Oil

Originally published at: https://peakprosperity.com/a-contrarians-take-ais-electricity-problem-and-the-bull-case-for-oil/

Buckle up, folks, this is a longer-than-usual podcast with Paul Kiker and me.

We discussed four big topic areas:

  1. Silver (and gold),
  2. The so-called “jobless recovery,” which is a polite way of saying the job market is worsening and unlikely to improve,
  3. The AI bubble, as evidenced by an amazing new graphic coupled to a profound lack of new electricity generation to support it,
  4. Peak Oil has arrived in the US without any fanfare whatsoever, which sets up oil for a major bull run.

Is it time for oil specifically, and commodities generally, to join gold and silver’s massive bull runs? Things sure are setting up that way.

But what about the “Mag 7” and their massive bull runs based on massive future build-out plans? Those seem to be running into a wall of electrical reality.

The story begins with this amazing AI bubble graphic:

The AI Investment cycle visualized Almost $1 Trillion has been invested into AI so far and that may just be the start pic.twitter.com/mxp2BOm1hO

— Evan (@StockMKTNewz) December 16, 2025

Wow!

$4 trillion of CapEx and barely half that in revenue by 2032? Well, okay, but here’s the problem: that level of CapEx is assuming the electricity capacity will be there.

That turns out to be a bad assumption:

Well, then that means the grid electricity won’t be there for the data centers. Okay, no problem! Then the data centers will have to generate on-site using natural gas turbines.,

Uh oh!

So, adding this all up, the AI valuations depend on an assumption of a massive build-out of power-hungry data centers, but it turns out a cursory glance at the electrical generation capacity in the US over the next 5 years cannot support those assumptions.

The key to successful long-term investing is finding stories that people haven’t discovered yet, or those that they have misinterpreted, and then investing accordingly.


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Have one question: as US prides itself with immigration(implicit population growth) that so far has worked as there were always new energy either found or to be drilled to support that, how would you approach this when peak shale oil is at hand, meaning reasonable population should also reflect this… Japan has thought about this for decades as they have tiny island and need to carefully plan these aspects or lot of people will starve.

If big country like US would overshoot this, that means Mao’s “great leap” type issues and literal crash in living standard by poor planning. Mind you, it isnt often about absolute amount of food, it is about logistics failing for some reasons.
New Venezuela or middle east conquests wont help if say US had 500mn people and zero domestic energy production (maybe somewhere in 2050 to 2100).
(It is very understudied aspect how much farmers could produce energy crops if oil and gas stops coming overnight)
I understood perfect storm in Venezuela past 20 years caused this kind of crash (democrats with crazies back in power scenario with printing money etc etc).

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The Venezuela situation is all about oil and not drugs. It ties in with Trump traveling to the Far East in his quest to replace China’s rare earths. When the AI Bubble arrives it will explode spectacularly.

The AI boom is all centered around affordable and available energy which we no longer have. It will consume the energy citizens need to provide for themselves and their families and make energy even more expensive for the average consumer. We are already seeing this with current memory prices for computers because companies are selling it to the AI data centers. I purchased some memory for a computer I was building. It cost $88 and now that same memory is a little over $400.

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Loved this, you guys hit a little bit of everything.

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Info for perspective:
The local land prices hear in central Georgia have recently hit new highs. I’m hearing numbers that are double or close to triple from the usual selling prices per acre from a couple years back. I’m talking about average rural acreage of say 40-200 acres. Large farm acreage in excess of 200 acres are up 50% or more but not double yet from 2-3 years ago. I don’t know where the money is coming from but it’s there. I’m guessing Joe Normie is figuring out that leaving a million or two in the bank is better spent in land or other hard assets. This is evident in the rising price of PM’s as well. I’m saying this because sometimes us gold and silver bugs get blinded by our own campfire. I think we’re seeing the normies start to wake up. They may not know exactly what’s going on but they’re smart enough to put 2 and 2 together and know that cash is eventually going to be trash.

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As regards electrical generation, transmission, distribution, etc. - wait times for power transformers are easily two to three years out. That is just for “finished at the factory” and does not include all the transportation and commissioning work required.

Domestic electrical utility manufacturing has been nearly eliminated, with some exceptions - and the quality of these domestically manufactured goods are not as reliable as we all would assume.

There have been problems in electrical utility finances ever since capital expenditures were allowed to get a full tax deduction while maintenance and operations are taxed 100%. This has created a huge financial incentive to run a sloppy and nearly-broken utility as matter of financial survival - always adding new, stupid, “high tech”, crap to the mix when electrical generation and transmission should be dead simple money making year after year. The principles and business model were pretty much perfected in the late 19th and early 20th century.

This capital expenditure tax break, or maintenance penalty (depends on how you look at it), has ensured American electrical generation and transmission remains a brittle, stupid, machine with lots of choke points. Off-shoring has made our baseline for industrial civilization highly dependent on international shipping and finance - funny that! Everything always seems to point in that direction, huh?

AI swaps domestically manufactured human minds for a brittle, stupid, machine with lots of choke points that leave us vulnerable to international shipping and finance. Am I noticing a trend?!

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Crisis is essential for profits (control of our money). But…I’m recently shocked to hear that another nuclear fusion scientist has been murdered. Nuno Loureiro was, until yesterday, MIT’s leading fusion scientist. If interested check-out Redacted’s episode (sorry don’t mean to pull anyone out of here but.. yikes). You mean free energy is taboo? https://youtu.be/cedt_Yw1ajc?si=RHPjUdffeAV5oT2Y

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I’m beginning to think that the American (and Western) system of manufacturing has devolved into a self-serving enterprise focused solely on each individual outsourced part that pretends to work together for a common goal. It’s a clumsy system that resembles the old soviet days in Russia. The more I think about it, that’s really what it is. We’ve gone commie and most probably never noticed. Let’s not forget that the biggest employer in the US is Uncle Sam. Also, let’s not forget that nearly everyone else is working for someone that’s working for Uncle Sam. If America isn’t commie or one step commie removed, I don’t know what we are because our system isn’t anything I remember from years past.

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To say that we have “gone commie” is true in a sense.

The “free market capitalism” and “communism” we have been raised with are both tools of British Imperial statecraft developed in the early and mid-1800’s and deployed around the globe to (1) drive trade and commerce in a favorable direction for British (and later, Anglosphere) interests and (2) isolate and demolish rival resource (collateral) pools. The “free markets” were mainly deployed for achieve (1). “Communism” to achieve (2).

Richard Poe’s book, " How the British Invented Communism (And Blamed It on the Jews)" has a very engaging narrative and convincing sourcing and footnoting to describe the various ends and means around the Communism method of attack.

The British free-market system and Communism are both the same beast - both centralize economic control and finance. Free-markets do it via control of credit and technocratic centralization. Communists and socialists do it with raw force of will and police power. Neither produces liberty, both enslave and hand over near-total control to unaccountable central planners.

In America, at a certain point (1898 or 1899?), JP Morgan (i.e. the Bank of England and related financial interests) consolidated all electrical patents, manufacturing, etc. that weren’t already consolidated by Westinghouse. From their perch at the heart of finance, the money men became central planners - unelected, extremely powerful, steering civilization via the extension of credit, suppression of rivals, purchasing policy.

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With Venezuela I mean still in 2013 when oil price was high, they got huge revenue. So government gave cheap gas, cheap food(or free food… that Mamdani’s state run grocery stores concept already then), free schooling… but generally poor folks got lazy and didnt want to learn things. And corruption grew. Then sanctions hit and suddenly revenue stops, US oil company staff left and they were incompetent to even drill and maintain oil operation… some estimate was 10% of previous production.
Past 10 years due to these absurd problems (huge queues to get some gas) millions left venezuela. Most to nearby countries. Inflation hit hyper levels.
I get sanctions take hit but huge amount was incompetence.
Can give to Iran that despite same kind of sanctions, they are more functional country. So there are degrees to this.

I see this datacenter+ no energy capacity planning similar incompetence as these corrupt countries have. We will see how it goes.

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I cant help but think the shooting of the MIT plasma scientist..and the past shooting of another one..have something to do with peak oil..they wanna make sure there is no competition…

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@jaybrayali
My thoughts exactly…

Redacted were reporting he had crossed 2 energy giants with his research.

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Appreciate your contrarian investment lens on our civilisational challenges and critical focus on AI plays between US eyes on macro dominance and control through god like subservience through centralised AGI versus China dominance through manufacturing enablement.

With 20 strong years in enterprise cyber and governance-risk-compliance and 30 in agentic AI, I am excited about the emerging class of “sovereign AI platforms” that seem to mix AI transformative power, with practical issues of risk mitigation, cyber protection of sovereign political autonomy and hence rights to responsible freedom, coupled with privacy, data custodianship and the interplay of decentralised and centralised governance. This does not need to converge on global AI governance if we beat them at their own game with reality in place of megalomaniacal delusion.

As a cyber guy, i am always cognisant of the play between conditioning to control versus enable. Does a brake as control not more importantly enable us to safely drive faster?

The merging of these fields of cyber GRC and AI present the best opportunity for me to discover paths in the core issue of our evolution of political agency by AI to subsume our weak leaders and establish right balance between centralised macro and decentralised emergence.

There are even two classes of sovereign AI platform emerging that might be integrated for balance -

  1. nationalist macro variants such as we see with sovereign AI platforms of western and chinese governments at the poles, but also the likes of UAE and singapore in the middle, driven to protect and enable government to maintain independence in collaboration to progress top down values and economy in production of wealth

and

  1. libertarian micro variants such as we see sovereign AI platforms in beyond phone or even targeting concerned private enterprises, responding locally and bottom up to support collaboration of people and communities or concerned enterprises to conserve traditional humanistic values and economy in their production of wealth.

(Ed: sort of - definitions need more work)

Yet while this balance between nationalist and libertarian sovereign AI platforms might be a promising arena to discover dynamics at the level of collaborative economy enablement and agency protection, we might need wisdom in culture and philosophical framing of the evolution of our political agency to have any chance of maintaining progress attuned to reality and nurture something beautiful, good and true and avoiding further dystopic decline into ugly, evil, hallucinations. Another theme with resonance with your view. But this also calls for more work on philosophical-cultural-psychological-spiritual evaluation framing requiring integration with our sovereign AI platforms.

For me, America has the best and worst in culture and political agency - especially in balance between top down control and bottom up enablement of small busines - with the worst appearing to dominate in dystopic decline of culture wars and bankster-lawyer-threeletter coups. I see the best of American culture not expressed in the lens of your banksters at a macro investment level and cia tech giants but better expressed in more authentic side of the venture capital investment lens around startups. But because of decline, I welcome recent invitations to work as advisor with sovereign AI platform startups operating in the neutral middle ground globally with some at national level helping SE Asia governments integrate with UAE and Singapore sovereign AI platforms to develop their own sovereign AI platforms to enable local economy, but at same time engage with startups promoting regional mining-renewable economical development and libertarian sovereign AI platforms in west.

I guess I have a thesis that the neutral middle players is where we can best pivot in balanced civilisational resilience so would pivot in Se Asia then roll back to the west - from nationistic to libertarian. I guess I have another thesis that Se Asian culture has as yet unproven potential to nurture broader transcendental values like unity, harmony, balance, humility, service that complement the best of western libertarian values - but this is only partially subjectively substantiated by me so far in my work with their sovereign kings.

Asia does default to acceptance of subtler energies as my third tier of discovery in foundational research in bioelectrics in emergent intelligence and emergent beauty, goodness and truth as fittedness to reality and alternative to morality as technocratic control or abstract utilitarianism. Initially i aspire to use national sovereign AI platform work as stabler base to then fund looking at foundational biolectric emergence in regional agriculture and bioarchitecture as side projects- starting in oud production. So my current strategic preference or aspiration is to seek a civilisational pivot in applying the best of usa style investment capitalist lens on sovereign AI platforms startups across three tiers of nationist, libertarian and applied foundational research in the neutral space of asian collaborations and economical and philosophical- spiritual-cultural development.

Just my 2 cents , highly speculative, contrarian response to your stimulating contrarian perspective - but got interesting invitations to sovereign projects during recent silver pivot to reality and asian engineering and manufacturing drivers beyond banksters optics. The collapse of their empire in silver pivot seems to mirror core themes in my aspirations above. Hail silver the great redeemer and purifier to expose the crack in the matrix that lets the sun god gold shine in.

So ironically China is our hope… in that US cant bully them like that and they pursue energy independence any means necessary… What a time to be alive.

Oil companies do research, then according to Redacted, they simply put it in government vault and destroy evidence but also I would guess send B2’s to bomb Iran and anyone else in world trying to do so.

Redacted plays with grey area of conspiracy so I try to avoid that nowadays, they sprinkle that speculation always there (eg those tidbits to bait conspiracy folks to get distracted that is relevant in Brown U and Bondi Beach cases… mix those with real facts).

Went to school in Portugal and was good friends with the Brown University shooter. Well, that’s the story MSM is reporting anyway. Things have been going exceptionally “thirty odd six” for quite a while. Probably just a coincidence.

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Having heard the podcast and read the commentary I still do not have a clear picture of how to benefit/take advantage of the situation. All forms of human frailties exist and within our culture, we have no way to stop that situation from getting worse. What do you do with a person like Gov. Healy? The same people who complain about her lack of integrity will not, for a moment, allow for rules to fix the Gov. Healy problem. All that is left is to realize we are now in a crab basket with everyone climbing over everyone else. We are no longer on a wide-open ocean floor.
All that is left seems to be to get on top of the other crabs and hope there is an opening through which to escape.

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Oh wow! I’ve been thinking of doing this and now I know I’m not alone: here are the conclusions from a Dr. Casimir Gecys’s essay “Communist Ethics” (circa 1960’s?). With a little trick.

The findings of the Communist ethics may be summarized as follows:

  1. Trump ethics, being brutal and a tool in the hands of all ________ Party, is incompatible with a sound human nature and rationality.
  2. Their ethics rest on compulsion rather than conviction.
  3. It explains the technique of Soviet diplomacy, essence of Trump propaganda, and reasons for unilateral breaking of innumerous international treaties and agreements. In all, Trumpian regime’s activity at home and abroad marks absence of every scruple, in rough and uncouth proceedings, in loud and angry accusations, in their insolence and aggressiveness, and in that constant and affected show of impoliteness. It’s function is concentrated primarily to excite and galvanize the masses, at home and abroad–the fifth columns.
  4. Fanatism and blind devotion of fifth columns, and shielding their activity behind propitious constitutional rights of respective liberal countries, are understandable only in the light of Communist ethics.

Maybe it’s all just a simple twist of fate and the fates lead us to our destiny.

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I agree with the hopefullness but I’m more incline to think Wall-E scenario is more likely than a Star Trekian one but hay, gotta love it all

What if “they” are saying for misdirection that they are investing in AI, BUT they really are spending on buying up resources, space programs, the control grid, bitcoin pump and dump schemes, poisoning the air, water, and food, while continuing to sell prescriptions, manufacturing fake wars, on,and on. This all to hide and confuse everyone while plundering as much as they can get away with for themselves. Cutting of their money flow would hurt them just like us.

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