In this episode of Industry Focus: Energy, Motley Fool analysts Sean O'Reilly and Taylor Muckerman look at what changes the Trump administration has already made to the energy landscape, what moves are in the works, and how these actions could affect the oil industry in the near and long term. Also, the pair give a quick update on OPEC's new production cut and how it's affecting the price of oil, what's behind Ford's (NYSE:F) sudden and unexpected CEO shift, how the auto industry is shifting further into tech, and more.

A full transcript follows the video.

This video was recorded on May 25, 2017.

Sean O'Reilly: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. Today is Thursday, May 25, 2017, so we're talking about energy, materials, and industrials. I am your host, Sean O'Reilly, and joining me in the studio today is the coolest cat at Fool headquarters, Mr. Taylor Muckerman. How are you today, sir?

Taylor Muckerman: What's up?

O'Reilly: How's it going?

Muckerman: It's going all right, man.

O'Reilly: Good?

Muckerman: Yeah, it's great. 

O'Reilly: Nice simple T-shirt you have on there.

Muckerman: It's T-shirt Thursday.

O'Reilly: [laughs] That's actually a thing with you, isn't it?

Muckerman: [laughs] I don't know, I just thought of it.

O'Reilly: Forget Taco Thursday -- or is it Taco Tuesday?

Muckerman: It should be.

O'Reilly: They do tacos on Thursday at Whole Foods up the street.

Muckerman: It could be both days.

O'Reilly: Yeah, we can make it in the new kitchen from the renos, near the headquarters.

Muckerman: Yes we can.

O'Reilly: Today, we're talking about Donald Trump energy policy initiatives, lots of fun stuff there. Ford has a new CEO. John Rosevear, The Motley Fool's senior auto specialist talked to them. But first, OPEC cut production again, Taylor! The first one didn't work so great. OPEC announced they were going to extend their production cut by nine months into March 2018. I can't believe that's only nine months away, now that I think about it. I thought that, it felt like we were just talking about the cut last November. Cuts are going to be shared more or less equally across the board, particularly between Saudi Arabia and Russia, who really, really want oil up. The best part about this is that oil is down a little bit right now. It gained $1-$2 over the last week?

Muckerman: Yeah, a couple weeks ago it was still in the high $40s, now it's in the low $50s. So, it's still up over the last few weeks.

O'Reilly: So, this is not a surprise so the price probably isn't going to change, because the market prices things in directly.

Muckerman: Yeah, everyone is saying, "Oh, they only cut for nine more months, we need OPEC to carry all the weight, wah."

O'Reilly: That's what I wanted to talk to you about. What does the market want? It seems to me, apparently the market wants Russia and Saudi Arabia to literally say, "Here's the deal, we're going to keep cutting production until oil is at $80."

Muckerman: I promise you this: If Saudi Aramco is a publicly traded company and folks own shares in that, they wouldn't be clamoring for OPEC to cut oil production.

O'Reilly: Oh, that's interesting!

Muckerman: Because it would be publicly traded, and investors would have a stake in it. They want OPEC to cut because those are companies they can't invest in, so they want oil to go up for the companies they do invest in, without the companies they invest in reducing their oil output to help out the market.

O'Reilly: Now, the other side of that coin is, there has to be a marginal utility curve where the production that gets cut is less than the loss and revenue that you get from the increased oil price.

Muckerman: Yeah. But they just continue to put pressure on OPEC to do all their dirty work for them. And they're not making more cuts, they're just extending cuts. People wanted either more cuts for nine months or same cuts for longer than nine months, and it's just not going to happen.

O'Reilly: I just can't believe it's not moving. I would be very depressed if I was Saudi Arabia right now.

Muckerman: To the upside, that's it's not moving up? Yeah, everyone is saying this has been baked in, because people have been talking about them extending cuts for the last few weeks. They just haven't been confirmed efforts that they would extend the cuts. And you still have Nigeria and Libya that are free from having to cut their production because internal strife has limited production over the years. You look at rig count activity in other OPEC countries. Since April of 2010, it's up and to the right.

O'Reilly: How much percentage-wise?

Muckerman: Almost triple, between the UAE, Kuwait, Qatar, and Algeria, the oil rig count has almost tripled from fall 2010 to April of this year.

O'Reilly: And Saudi Arabia is leading this, because I'm sure all the other OPEC members, you were talking about, U.S. investors want OPEC to cut.

Muckerman: Well, any investor in an oil company that isn't based in an OPEC nation that you can publicly trade once oil prices are up.

O'Reilly: Right. And you have to know all the smaller OPEC countries that you just mentioned are like, "Hi, Saudi Arabia, we know you want oil up because of your Aramco IPO, that you totally want to raise $200 billion through." 

Muckerman: Yeah, there's definitely some game theory going on.

O'Reilly: Where is the Beautiful Mind Nash guy, what's his last name?

Muckerman: Nash equilibrium, wasn't that his full name?

O'Reilly: No, he had a first name! John Nash, it was John Nash. Nash equilibrium. Russell Crowe, good movie.

Muckerman: We'll have a show about Nash equilibrium later in the century.

O'Reilly: [laughs] We actually might be the show for it, it doesn't really work in tech ... well, it could work in tech. Anyway. This is comical to me now.

Muckerman: Yeah. Story as old as the time we've been doing this podcast.

O'Reilly: Really? Beauty and the Beast? Really?

Muckerman: Yeah, but not that old, just as old as we've been doing this podcast.

O'Reilly: Mr. Muckerman, Trump's budget. The energy policy.

Muckerman: Yeah, we're not going to dive into the whole thing.

O'Reilly: Kind of making good on his promise to drill, baby, drill.

Muckerman: A little bit. He's opening up the Arctic, seeks to raise about $1.8 billion over the next decade by leasing oil in the Arctic National Wildlife Reserve, I think that's the most commonly known as ANWR, or something like that.

O'Reilly: Oh, God, I haven't heard that in, like, 10 years.

Muckerman: Because they haven't been drilling there, Sean. But it's about to be blasted all over headline news for the next decade, as he raises $1.8 billion.

O'Reilly: Didn't Shell just leave the Arctic because it's expensive and hard to do?

Muckerman: Oh, yeah, they lost billions up there.

O'Reilly: Why are we opening this up then? [laughs] 

Muckerman: They had rigs in the ground, they didn't find oil they thought was there--

O'Reilly: Do you know the number? Was it $2 [billion]-$3 billion?

Muckerman: I don't know. It was plural.

O'Reilly: There were nine zeros.

Muckerman: I don't, frankly, know why we're opening this up. Maybe because we're nervous that shale will run out and we need offshore oil. But it seems like we've been saving our Gulf of Mexico offshore oil for the last few years. So, it'll be interesting to see if anyone bites.

O'Reilly: Right, because it's just opening it up to possibility.

Muckerman: Yeah, it's not that he's actually gotten bids, it's that he and his team just want to make a statement, I think.

O'Reilly: And oil wobbled the other day because he talked about selling some of the oil in our reserve.

Muckerman: Oh, yeah, you know, just putting our national interests at heart there.

O'Reilly: Why? To raise money?

Muckerman: Yeah, but it's only around $500 million. The sales from these reserves would gradually rise over the following years, peaking at nearly $3.9 billion in 2027. Just for everyone out there, we have around 688 million barrels of crude oil in our strategic petroleum reserve. It's about 74 days of our current production rate of 9.3 million barrels per day.

O'Reilly: And we did that after the Iranian oil embargo in the late 70s.

Muckerman: Yeah, just in case, if we need it, we have some oil, and we don't need to worry about exports.

O'Reilly: Isn't all of that in some crazy underground cave?

Muckerman: In Louisiana and Texas, I believe. Heavily guarded, probably more legitimate than the gold in Fort Knox.

O'Reilly: Oh, wait, it might be worth more.

Muckerman: Not about the value, I'm just saying, there are all these conspiracy theories that there's actually no gold in Fort Knox.

O'Reilly: Really?

Muckerman: Yeah, you never heard of that?

O'Reilly: No, I just saw Goldfinger, where the villain in the James Bond movie wanted to blow up Fort Knox. 

Muckerman: Yeah, and after watching that movie, the president removed all the gold. Just like all the casinos now after Ocean's 11, they don't keep any money in the vaults.

O'Reilly: Naturally.

Muckerman: I'm just kidding.

O'Reilly: I'll tell you what, though, I have been to the Federal Reserve in New York. Their gold vault, five stories below the street, that is legit.

Muckerman: You've been down there?

O'Reilly: Yeah.

Muckerman: They didn't move that after Die Hard

O'Reilly: No. And each country has stacks of gold down there. It's like, there's England's gold, it was all moved there after World War II.

Muckerman: When they start buying that back -- there's also conspiracy theories about countries bringing the gold back under the cloak of darkness so that no one really knows where it is, or who has how much.

O'Reilly: [laughs] Oh my gosh. I can personally verify that there were giant stacks of gold down there.

Muckerman: So, we've given folks a few conspiracy theories, if they want to go chase a rabbit hole.

O'Reilly: If they want to go watch YouTube for five hours. [laughs] Gold Federal Reserve conspiracy, YouTube, folks.

Muckerman: No joke. Have fun.

O'Reilly: The federal budget is over $2 trillion, why do we need this money?

Muckerman: Because he wants to increase infrastructure and military spending while cutting taxes, Sean. He just needs to legalize marijuana, and then we can keep our oil in our strategic petroleum reserves.

O'Reilly: What is with you and your marijuana kick, lately? You were all about the hydroponics the other week.

Muckerman: Well, we've been covering them a lot in Stock Advisor Canada.

O'Reilly: It's a booming business, for sure.

Muckerman: It's going to be legalized for anyone over 18 next July. For any of those folks who live near the border.

O'Reilly: Naturally.

Muckerman: But also, because, if you look at the states who are doing it, they're making a lot of tax revenue, and drug-related crime is going down in most of those states.

O'Reilly: Really?

Muckerman: Yeah.

O'Reilly: Oh, well, yeah, you're removing ... So, moving on. Ford got a new CEO.

Muckerman: They did.

O'Reilly: What did you think about that?

Muckerman: Ex-furniture CEO taking over Ford, an automotive company that's trying to concentrate on automated driving.

O'Reilly: This is the second time this has happened. Ford executive chairman Bill Ford, he's obviously, last name.

Muckerman: Legacy. Great-grandfather or grandfather, I don't know which one it was.

O'Reilly: I'm thinking grandfather. He made the bold decision to shake up the company's leadership by hiring a new CEO from outside the auto industry. And you, of course, the furniture company is Steelcase CEO Jim Hackett.

Muckerman: He didn't come straight from there. He's been at Ford, running their automated driving department, autonomous driving.

O'Reilly: It's interesting because Steelcase is actually known for being a really cool company, given what they do.

Muckerman: And he led the transformation from cubicle offices to open floorplans, basically pioneered that not just for his company but I think for the entire office furniture --

O'Reilly: Right. The Glassdoor ratings of the company are awesome, and he's a very forward-thinking guy. The Fool senior auto specialist, John Rosevear, had the opportunity to chat with executive chairman Bill Ford and the new CEO, Jim Hackett, formerly of Steelcase. You may be wondering why he did this. It's because they wanted a new perspective and the ability to adapt in the 21st century. As you said, he was running the automated driving division. They spoke with Ford's new CEO in a big conference room, and then they actually sat down with John --

Muckerman: This was after the announcement?

O'Reilly: Yeah.

Muckerman: Wow. Look at that, a Motley Fool exclusive.

O'Reilly: I wanted to give everybody a really quick snippet, and I'll give everyone directions on how to get the full article. John starts off and says, "Jim Hackett, the former Steelcase CEO who had been running Ford's future-tech subsidiary, is taking the top job effective immediately, Ford announced on Monday." Reports for the past couple of weeks suggested that the reason for the move was, Ford's board was unhappy with the share price moves. John asked him about this and Bill Ford said, "The fact is that we are in unprecedented times, both in terms of opportunities and potential landmines. I believe that we need a transformational leader who has done it, and who has reimagined a company into a future and then brought that company along with him." He's, of course, referring to Steelcase here. "We're very fortunate to have that in Jim." 

Rosevear asked Jim, what needs to be changed at Ford, and Mr. Hackett went on to describe how he actually still believes in people despite the whole automated thing. "It starts with the people and how they can be empowered to do their jobs. The decision-making improvements we want to make are about reducing the friction that can build up over time." I'm actually very anxious to see what happens here, because given the constant dynamic change that has occurred over the last 10-20 years with the advent of computers and AI and robots and all that, and Ford is a huge company, they have plants all over America.

Muckerman: For now.

O'Reilly: For now.

Muckerman: I'm just kidding, that was just a joke.

O'Reilly: But, it was an awesome read, it was really cool that John was able to sit down with him. He actually knows a ton of people over at Ford. I highly recommend following him if you're interested in this. For the full article, email us at industryfocus@fool.com, and I'll be sure to post it to our Twitter @TMFEnergy as well.

Muckerman: One quick thing, he's going to have more support, and rely on some of his "lieutenants" much more than former CEOs.

O'Reilly: For the car stuff?

Muckerman: Yeah, because he doesn't have a technological background.

O'Reilly: It's more of a cultural thing, you think?

Muckerman: I think so. And, he's 62, so they can't expect him to be the CEO for a decade, I wouldn't imagine.

O'Reilly: Right. So, go in there, change the company for five years ...

Muckerman: Change a bunch of things, groom one of these two guys who, I think they had to convince -- they made a few other internal promotions, and I think they had to convince one of them pretty hard to stay, it's probably one of those things where it's like, "You two are going to duel it out for the next three or four years, and whoever emerges takes over the role as CEO."

O'Reilly: Yeah. It's really cool how GM and Ford are embracing the technology and the dynamism and everything.

Muckerman: Well, it's about time for Ford. General Motors has partnered with Lyft and Google. They have Honda partnering with Waymo, which is part of Google's autonomous driving outfit. And you have Fiat doing the same thing. So, there's companies out there that are a few steps ahead of Ford when it comes to autonomous driving.

O'Reilly: Pretty soon, we're going to lose the autos to Dylan Lewis there in the tech sector.

Muckerman: Look, he's already outside the glass trying to poach them.

O'Reilly: You want GM and Ford, don't you? No, they're ours. No. [laughs] 

Muckerman: We're going to buy high and sell low to you, bud. There's also talk of --

O'Reilly: [laughs] Dylan is giving us an evil, plotting look.

Muckerman: Who's really going to profit from autonomous driving? Is it going to be a car manufacturer? Or is it going to be the people who provide the software, the security, the sensors? Who's really going to make the money here? Or is it going to be the people who make the aluminum shelves? Aluminum.

O'Reilly: Where did you get that from?

Muckerman: That's how they pronounce it --

O'Reilly: In Canada?

Muckerman: No, everywhere else.

O'Reilly: Really?

Muckerman: I think so.

O'Reilly: In the world?

Muckerman: Yeah.

O'Reilly: Oh, gosh. America.

Muckerman: Aluminum.

O'Reilly: Aluminum. Our producer is laughing at us. What's wrong, Austin? What? You come in here and say aluminum. [laughs] We love you, Austin.

Austin Morgan: Haven't you ever watched Top Gear? That's how they say it.

Muckerman: See?

O'Reilly: Oh, wow, no!

Muckerman: I haven't, but thank you. Validation.

O'Reilly: That's awesome. This is like the whole feet versus meters thing in the world, miles and kilometers.

Muckerman: Feet are obviously better than meters.

O'Reilly: Obviously, it goes without saying.

Muckerman: Even when we reference meters, we still spell it wrong, just to be American.

O'Reilly: You want metres?

Muckerman: That's how a lot of people spell it.

O'Reilly: God, I can't.

Muckerman: Anyway. Is that it?

O'Reilly: Yeah, that's it. That was a wacky show, huh?

Muckerman: Yeah, a little bit. We haven't talked about Ford in...forever, maybe.

O'Reilly: Yeah, we need to get Rosevear in here again. That is it for us, folks. Be sure to tune in tomorrow for the Technology show with Dylan Lewis, who will never get the autos. If you're a loyal listener and have questions or comments, we would love to hear from you. Just email us at industryfocus@fool.com. Feel free to give us a shout out to our Twitter @TMFEnergy. Have a good one, everybody! Fool on!

John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sean O'Reilly has no position in any stocks mentioned. Taylor Muckerman owns shares of Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Ford, and Whole Foods Market. The Motley Fool has a disclosure policy.