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 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 Crude Volatility: The History and the Future of Boom-Bust Oil Prices. His expert analysis has led him to be frequently interviewed by Bloomberg, CNN, CNBC, The Economist, NPR, the Financial Times, The Washington Post, and, of course, The New York Times, and he frequently testifies around the world, including in Washington before Congress.
He has also spent 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 Senior Director for International Energy on the National Security Council for President George W. Bush. Bob was named among the 500 most influential people in Washington by Washingtonian for his work in both the 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 in leadership he has learned along the way.
I'd also like to add that he is my college roommate, my dearest friend, and a brother to me. He is truly one of the wisest people I've ever known. So to have him on the show — as someone who advises CEOs, who advises presidents, and 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 and heard your other interviews, and to join that guest list — I really just can't thank you enough. So thanks for having me on.
Alan Fleischmann
So thrilled to have you on. Let's start a little bit with your early life — where you grew up, where you're originally from. I know a lot of these details, so it's always fun for me; correct me if I get them wrong. But tell us where you were raised, a little about your father and your mother and your siblings. Your mom just recently passed away, and I couldn't help but say she was one of the great human beings I've ever known — someone who walked the walk, not just talked the talk. She was a woman of deep faith. She believed in community, and that every life matters. So let's start with your mom. Tell us about her, and then about your parents.
Bob McNally
Thank you for that, Alan. And yes, my mom was the first leader I encountered, among many other things. I grew up in central Connecticut, in the Hartford area, the product of what back then was called a mixed marriage. My mother was of Sicilian Italian background; my father was 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 I love them very much.
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 I've made my life in Washington and the Washington area ever since, when not abroad. And as you know, now I split my time between North Carolina and the DC area in Maryland.
Alan Fleischmann
What brought you to AU — American University — where you spent four years studying international relations and political science? Tell us a little about that choice of Washington and that field.
Bob McNally
I grew up in Connecticut, and I just loved languages. I loved history, especially military history. I'd 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 that I wanted to make my career in politics, and maybe business, but certainly politics and international affairs. As you know, I wanted to be a military history professor. But I didn't get rich in the Peace Corps. So while looking for work to prevent starvation in grad school — we both went to Johns Hopkins SAIS — 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.
As you know, when I graduated from Johns Hopkins SAIS, 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 about it. Because if you think about it — you know me — I've never been exactly a math king. The abstract concepts of bond derivatives and things don't necessarily come 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.
So I took to oil because of its inherent political and geopolitical character, in a way almost no other commodity has. That's what opened the door to the wonder of not only oil, but gas, and then renewables — all energy markets. It's that confluence of markets, policy, and geopolitics that drew me to it. So I'm glad I drifted that way.
Alan Fleischmann
I know many people who have come to you for advice over the years — people who work with you and your firm. You're an entrepreneur; you started your own firm. I'm very good friends with Dan Yergin, who won the Pulitzer Prize for The Prize, and I know that he and so many others look at you as that next-generation leader in the field. A lot of the credit goes to the fact that you speak plain English when you talk, and you get it right. So many folks I know — Paul Tudor Jones and others who've been on the show; Paul has been on the show — would credit you as someone who gets it right, often when it doesn't look like a thing is going to happen. Give us an example of that. There are several examples when you said certain things and people looked at you and thought you were coming out of nowhere, and yet it happened. It's happened to us now several times. Give us one example.
Bob McNally
Well, during the big, spectacular oil price collapse in March of 2020, I was in Riyadh. There had just been a disastrous meeting of OPEC+, and the bottom had fallen out of crude oil prices. I knew from my analytical work that the price was going to drop to very low levels. 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 ask you what Goldman Sachs thinks — "Goldman says oil prices could fall to the low $30-a-barrel level," and it was about $60. "What do you think of that?" And I said, "Manus, the way things are going, oil prices will fall closer to $3 than $30 a barrel."
And then there was something you're not supposed to have on live television: a gap. He was so stunned by what I said that he couldn't even respond. After a minute he sort of got his composure. And I wrote that down and kept track. Ultimately, Brent prices didn't get to $3, but they got closer to $3 than to $30. So I ended up being right on that one — and it caused a gap in the Bloomberg reporting.
But you know what that was? Look, as my wife will tell you, and as you certainly know, I'm hardly infallible. Here's what I've tried to do all my career, though, Alan. Although I've been in and around Washington for all of 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 in the Peace Corps, and I was advancing President Bush's domestic and international energy policy in the White House.
But for the rest of the time, I was sort of the ambassador from Planet Market, just trying to understand things, trying to be objective, to predict and not to influence. And I think that's a rare and really enjoyable kind of mission. It makes you interesting, I think, to a lot of folks in Washington, because they're used to lobbyists, used to folks who have an agenda. My role was really to say, look, professionally, I'm just going to tell you where I think things are going. I may have my own views about the way the world should be, but if you do this policy, the market will go that way; if you do this other thing, it'll go another way. And so what I've enjoyed — and hopefully the reputation I've earned — is that often it will be Democrats who ask me to testify, not Republicans. Our friend Patrick Kennedy has asked, and I've enjoyed many good conversations with him over the years about energy. They see you as a straight shooter, someone capable of looking at things objectively and giving an honest opinion about the impacts of various policies on markets.
Alan Fleischmann
I love that. You touched on the trajectory a little — you went to work for Tudor Investment Corporation before you started Rapidan. Tell us about that.
Bob McNally
Yes. After grad school, I went to work for a consulting firm called Energy Security Analysis. Sarah Emerson, also a SAIS grad, is a friend and an excellent energy expert in her own right; she's now up in Cambridge. And Ed Krapels, her late husband, and I — I sort of cut my teeth there, learning about how markets work.
After a couple of years, I moved on to Tudor Investment. Paul Tudor Jones is a friend, remains a client of mine, and is someone I've worked with longer than anyone else in my career — a great man and a great leader. Tudor had an office in Washington whose job was to keep the traders from being surprised by anything governments did that affected financial markets, whether it was energy, commodities, the dollar, bonds, or stocks. So I did a lot of macroeconomic work, went to Europe a lot — as you know, I spent a lot of time watching the EMU turn into the euro and the ECB and so forth.
And then I got to know Larry Lindsey through Tudor; he was President George W. Bush's first economic adviser. 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
I remember this very well. You got the job unexpectedly. You weren't a campaign person; you weren't political like that, even though I'd argue you're a natural for it. When people ask how you got the job at the White House, it was just a job — but a pretty significant job in the White House. And you got to know President Bush. He had a nickname for you — two nicknames, actually. He had one for you at the very beginning, and then, unlike most, he changed his mind. If I recall, he changed his mind on Air Force One, where he gave you your second nickname and eliminated the first.
Bob McNally
Yeah, and he was so right. It was on Air Force One that he gave me the second one. The first one was "Light Bob," and that takes some explaining, because he used word association. Someone asked him why "Light Bob," and I didn't dare ask him myself. He said, "Well, it's because he's smart, like a light bulb." So instead of "light bulb," it was "Light Bob." But later a second nickname came that I actually prefer: "Electric Bob," as in electric bill — Electric Bob. So in the White House interoffice mail, you get those little envelopes with a red dot and a letter inside, and I would be "Electric Bob." Anyone who knew me in those days would know me as Electric Bob.
Alan Fleischmann
When I talk to people who were in the White House during that time and I mention your name, they never say "Bob McNally" — they say "Electric Bob." So tell us a little about that journey and the time you spent at both the NEC and the NSC. You were part of the National Economic Council as well as the National Security Council. Explain a little of what that job entailed and who you interacted with. You did a lot of work with the private sector too, not just the public sector — talking to the states, dealing with international issues, which was certainly a huge part of it. And if I recall, you also dealt with a lot of CEOs and a lot of leaders.
Bob McNally
Yeah, it was an extraordinary time to be doing energy policy. I refer to it as "Enron to Iraq." Our largest bankruptcy in history happened to be Enron, and I was involved in all of that. The invasion and the Second Gulf War; 9/11; the California electricity crisis. We did a major climate plan and a major energy plan. Energy as a policy area can be boring if you look at it over decades. But 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, the use of strategic reserves, a massive attack on the homeland, blackouts, and bankruptcies — over two and a half decades you'd say to yourself, I've had a great, unusually active career in energy. That was my two and a half years. So I'm very fortunate to have had it.
The issues came at us so fast and furious. In the beginning, we hadn't really filled out the administration — I was there on day one, but many folks weren't. So you were dealing with the California crisis, the energy plan, even 9/11, without a fully staffed team. But you learn quickly. And I have to say, I saw behind the scenes things that really impressed me from a leadership perspective. I know you're interested in leadership, and this gave me some thought. What no one else ever sees — at least with President Bush — is when they make decisions that are politically hard. Usually, if there was division among the staff, we'd bring an energy decision to the President and have to make a call: "Mr. President, we want to tee up this issue for you. So-and-so thinks 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 we all agreed on that was so difficult politically we needed his buy-in: federal eminent domain authority to site power lines. The federal government can step in and say, "Hey, New York, you can't block a line from going through," or, "Connecticut, you can't block a high-power line from going from New York to Long Island; they need the power out there." Republicans don't really enjoy the use of federal power and the taking of private property. However, after the California electricity crisis, we felt that for an adequate grid, in certain cases the federal government had to have the authority to site these lines. So we brought it to him and said, "Every Republican is going to hate this; it goes against the private sector, private property, federalism. But, sir, we think it's necessary." And he said, "If it's necessary for good policy, put it in the bill." That doesn't get published, but it's things like that — where you see a leader behind closed doors make a politically difficult decision for the benefit of sound policy — that I think are impressive. Those are the types of things I really enjoyed about my time behind the scenes in the White House.
Alan Fleischmann
Tell us a little about your impressions of Congress, too. Ironically, you were there during a very contentious time — or just before. You were there during 9/11; a lot happened right after that. At the time it was considered a very contentious period, but looking back, there was a ton of bipartisanship and a lot of collaboration. It's interesting how the world has changed and shifted over these years. So tell us about your impressions of both Democrats and Republicans, if you can without getting too political, and your impressions of some of the leaders in Congress you dealt with.
Bob McNally
Like you said, we had 9/11, and afterward there was a period of collaboration, cooperation, and unity that we perhaps haven't really seen since. That was extraordinary. It's all relative, but back then I think there were more workmanlike relations. I certainly had them with Democratic staff members and members of Congress. 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 are now — especially on energy, and certainly on climate change. We're light-years away, in both parties, from where we were 20 years ago on the issue of climate change.
After 9/11 and the California electricity crisis, folks wanted to get stuff done. And remember, President Bush — as I tell folks — moved just about every clean energy policy you can think of. I worked on this personally. We walked back into the fusion energy program; our energy plan had the first-ever residential solar tax credits; we had a hydrogen fuel program. It was truly an all-of-the-above policy that President Obama continued to some degree. So there was more common ground.
However, after 9/11, you did see the vitriol return, and we didn't get too much done on a bipartisan basis, to be honest. It was only Republicans, who held the Congress, who were able to pass an energy bill. I'll say personally that after the Enron subpoena, I was the number one respondent. I'm happy to share in this public forum that, if anything, I was "Mr. No" to Enron — I was hardly an enabler. They wanted us to do things like deregulate electricity faster. They wanted regulations on coal so they could sell more gas. If anything, behind the scenes, until they went bankrupt, I was not a friend of Enron. I was saying, "No, we're not doing this. No, we're not doing that."
So when the bankruptcy happened, there was an investigation by Congress — the Senate in particular, Senator Lieberman's committee — and yours truly was in the bullseye, and that was no fun at all. I'm Catholic, so I'm inclined to feel a little guilty anyway, but I knew I was clean as a whistle. I didn't like the investigations. Once it was clear that I hadn't done anything untoward — and if anything, well, I'll just leave it there so I won't get political — let me just say I was clean as a whistle, and they backed off.
So there was a little frightening moment there. I didn't enjoy it at all, but I guess that comes with the territory. I have a lot of respect for folks in 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 just a little whiff of that, and I didn't enjoy it. But anyone who takes that role, especially these days, has to take that risk.
Alan Fleischmann
That is one of the unfortunate parts of public life and public service. So why did you leave the White House? And you left in the first term.
Bob McNally
Well, my wife, Denise, said, "You can stay with the President or you can stay with me." It wasn't quite like that. But I'd promised Denise two years, and as the two-year mark came, we were getting ready to invade Iraq. The President literally held up the line at the Christmas party — wouldn't let Denise go after getting our Christmas picture taken — because he'd gotten word that I was going to honor my promise to my wife and leave. The President lobbied Denise and got six more months. I was the last one of everyone who'd been there on day one — from Larry Lindsey on the National Economic Council on down — to leave. They say the President runs a marathon but the staff sprint, and the average lifespan for a senior director or special assistant was 18 months. I made it two and a half years. So it was really a return to my family.
Alan Fleischmann
That was the real reason you left. Were you sad to leave?
Bob McNally
No, I was ready to leave. I'd done so many things; I think I was ready to move on. I went back to Tudor, but 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, made partner, and then, 15 years ago, decided to hang out my own shingle, with Tudor's blessing and support. And they remain a client to this day.
Alan Fleischmann
Tell us about the startup of Rapidan — why you called it Rapidan, what its purpose was, and what Rapidan does.
Bob McNally
Rapidan is a beautiful river in central Virginia, a tributary of the Rappahannock. It flows out of the Shenandoah mountains. Denise and I had some land on that river for many years, and our kids grew up there — I think you've visited, with your family. So it's a special place to us.
What I wanted to do was set up a company that did what I'd been doing for Paul Tudor Jones, and for George Bush before that: bring objective analysis and informed research insight at that intersection of markets, policy, and geopolitics. I call it MPG — not miles per gallon, but markets, policy, and geopolitics. Things are getting more volatile in oil markets, policy, and geopolitics, and I said the world is going to need more informed veterans — experienced analysts and advisers who can really integrate those three disciplines. 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. Scott Modell, an ex-CIA field officer, 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
There is no firm like your firm. It's independent, from what I can tell when I talk to CEOs and others about what you do and how you advise them. I hear the same thing over and over: there's no firm that's independent like yours, and no firm that's as current as you are — meaning you deal with what's happening in the moment, but you also aren't afraid to lay out, as I said earlier, what's around the corner, what could be around the corner. A lot of firms, if they do what you do, are very caveated; they like to put all the caveats out there.
Bob McNally
Yeah. On the other hand, there are some fine firms that analyze oil markets, and other firms that do geopolitical work. What I think makes Rapidan unique is that we're sort of a one-stop shop — under one roof, with one set of very talented teammates. We do the analysis of the markets — the supply, the demand, the inventory, the price — and we also do the policy, the regulatory, and the geopolitical work. It's bringing all of that together. Because we know energy is exceptionally exposed to and influenced by political, policy, and regulatory factors, as well as geopolitical risk, as we see in the Middle East and with Russia. So I think that makes us unique. We have an unrivaled team of experts — former intelligence officials, energy ministry officials, White House officials, and analysts.
And it's a lot of fun. We have, as we say, plenty of material to work with these days; it's just raining opportunities in terms of all the mayhem in the world. We enjoy that space where we're nonpartisan — we've got right, left, and center. When we go public, we try to keep it real. I commend the Biden administration for trying to refill the Strategic Petroleum Reserve, for example. When they do things I disagree with, I disagree, but we're not out there just to be partisan hacks. We're trying to provide something very scarce: objective, reasoned analysis and insight on the most important commodity on the planet. Right up there with food is energy — and you need energy to get the food.
Alan Fleischmann
So when you describe your point of view, is there a point of view you bring to energy policy? When you look at renewables and alternatives — solar, wind — and at fossil fuels and nuclear, is there a point of view that Rapidan has? Or do you believe in all energy and serve the purpose of your client?
Bob McNally
Yeah, I think there's a point of view. But let me back up, because this gets back to your question about dealing with members of Congress, the private sector, and members of the White House staff and the cabinet. During my time at the White House, I was really impressed with elected officials. I'm impressed with how many issues they have to master, and the way they come up in public life. By the time they get to the top — member of Congress, White House or cabinet staff — they've encountered in public life most of the issues they're going to deal with. But energy is the one they probably don't know so well. Energy is probably the most important issue we have where you can ascend to the top in public life having never really encountered it on the way up, because crises happen few and far between, unless there's a local utility issue.
So the challenge is that there's not a lot of depth of understanding about this issue relative to other public policy areas, like defense. But at the same time, when there's an energy crisis, it becomes the number one thing. When you have an energy crisis or problem — record oil and gasoline price spikes in 2022, the California blackouts — officials make decisions out of, and I say this in the kindest way, ignorance. They literally haven't encountered the issue the 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 solved. And that can lead to bad outcomes.
So the perspective I brought, from a lifetime of learning — and I say learning, because I'm still learning about energy, from Daniel Yergin and others — is one of pragmatism and reason. I'd say this about even my friends who worked for President Obama. When I think of friends like Jason Bordoff, head of the Columbia Center on Global Energy Policy, I think we share a similar sense that, whether you're briefing an official or a private-sector person, you have to bring reason and practicality to it.
And it would all boil down to this: energy transitions take a long time. Energy is one of the biggest things we do on the planet — more people and more money are involved in energy than almost anything else, right up there with food production and defense. And we know from experts that it's really difficult to quickly transition off of fossil fuels, which are about 80 percent of the mix. It's difficult mostly because of the scale of our investment. When you try to communicate to folks on the left or the right why we can't snap our fingers and suddenly be free of imports, or suddenly be all-renewable-dependent for our electricity, what you get from that combination of ignorance and panic is irrational aspirations about what we can achieve and how quickly. It's my job, and the job of my friends — and I know many Democratic officials who understand energy — to educate and to explain why energy is a slow boat to turn. We have to be realistic about how we can deal with challenges, including climate change.
Alan Fleischmann
And do you find people willing to have those conversations?
Bob McNally
More and more, yes. I think we had a period, Alan, between the Paris Agreement — 2015, when President Obama brought us into the Paris Agreement, and then President Trump took us out, but the world kind of went ahead — and when President Biden was elected, when you had the euphoric peak of enthusiasm for the idea that we could quickly transition to net zero by 2050 and rapidly reduce our dependence on fossil fuels. So between 2015 and, I'd say, 2021, it was hard to have these pragmatic conversations.
But you know what? Reality eventually wins out. And since 2021 — with the Russian invasion of Ukraine, with the energy price spikes, with the political changes underway not only in the US but also in Europe — I think you're starting to see a return to a more pragmatic, reasonable discussion on energy, the environment, climate, and so forth. So I think we're getting back there slowly. We did have that moment where we thought we could skip over history, economics, technology, and resource realities, and somehow wave a wand and be off oil and gas in 30 years. There was that moment where people wanted to believe it and didn't want to talk about anything else. But I think reality is returning.
Alan Fleischmann
Before we talk about leadership — I know you just celebrated your 15-year anniversary as a firm at Rapidan. I'm curious, looking back at the beginning: you're an entrepreneur, you started your own firm, I was there at the beginning, I watched you build this global firm over the years, highly regarded, like no other firm I know. I'm sure there are lessons learned or moments of reflection you've had as you look back over the last 15 years and this incredible team of 25 people. Anything that stands out that you want to share?
Bob McNally
Well, the only thing I'd say — my epitaph will be, "Here lies Robert McNally. He was luckier than he deserved." I really started with my mother, and with you, and with AU, and right through ESI, and Paul, and 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, support, and encouragement all the way.
When I look back to 15 years ago, starting out with one other colleague in the basement of a stinky house that had been converted into law offices, my thought goes right to my team — both my longtime advisers and friends and the team I work with, a battalion of people. My mother just knew, like you do, how to attract and inspire great people to work together with positive energy to accomplish something. And that's what we did at Rapidan. I can't explain it other than to say I've been blessed, having been nurtured by the folks I mentioned, and that's what I've tried to do.
There's some serendipity working too — but it's working. We've got a great team, we have a lot of fun, the issues keep coming at us, and I'm 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. Paul speaks to the man who would empty his office trash can the same way he'd speak to his top investor. He's such a gentleman, such a model for how to be a leader and also a winner — driven to persist and to excel, but a gentleman while doing it. So I've tried to emulate the people I've known. Any success I've had is due to the wonderful people in my life.
Alan Fleischmann
That's wonderful. You're listening to Leadership Matters on SiriusXM and LeadershipMattersShow.com. I'm your host, Alan Fleischmann, and I'm here with Bob McNally, the founder and president of Rapidan Energy Group, discussing his journey 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, as a smart political mind, and as an entrepreneur who built a global business 15 years ago and advises some of the most formidable leaders in the private sector that we know. That's why we have him on the show: he brings different reflections on leadership. With great humility, he's done some extraordinary things, and he's written a great book.
Let's go back to that book. You wrote it, and it's still considered as valid and relevant today as the day you wrote it. I'm totally amazed by how many people give you book awards today for a book you wrote in — was it 2017?
Bob McNally
Yeah, 2017.
Alan Fleischmann
You got it. You got great awards in 2018, but you also just got one in 2023. As energy issues become more and more important and people understand the future — which becomes more and more urgent — your book becomes more and more relevant. So tell us a little about the book itself.
Bob McNally
Yeah. I felt I had to explain something we hadn't seen in modern times. 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 spiked almost fivefold 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? It hasn't. So we had these two black swans that affected the price of oil, which is the lifeblood of modern civilization.
I knew I wanted to explain that. Most of us think the price of oil is basically stable, unless there's a recession and it goes down, or a war and it goes up. But it's behaving more — if I can use a roller coaster metaphor — like Space Mountain than like It's a Small World. So 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 — by how much they've been rising and falling, and why, the causes and the amplitude — require you to look at history. You have to look before the Arab oil embargo of 1973. Everybody starts their history with that, but actually, to really understand what's going on and why we're on a roller coaster — why we're on Space Mountain right now — you have to look before 1973 to examine the economics of oil: why it's volatile, and what causes it to be stable.
And here again, it led to one of these delicious tensions I find in public life, where I admire leadership. The bottom line is that you don't get invited to parties in Washington by saying this, but what my book revealed, and what history shows, is that the only thing worse than OPEC managing the oil market is OPEC not managing the oil market. In other words, if we want stable oil prices, we have to have something that normally makes us uncomfortable: a regulator controlling the supply of oil. That has been OPEC and OPEC+ since the 1970s. But before then, it was the United States.
And here's the delicious irony: guess who the king of all oil regulators was, the granddaddy of OPEC? Texans, in the 1930s. We'd just had a couple of decades of wild crude oil price volatility, and Texas had had enough of it. Texas — I mean, I grew up in Connecticut, but Texas — 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 and keep oil prices stable, Texas regulators had to resort to such heavy-handed government control of oil that it would have made a commissar blush. And they did this not because they liked having the government step in and tell business what to do — they literally sent troops into the fields to prod the drillers away from their own private property at bayonet point to stop production. They did that because the only thing worse than that was the wild price volatility.
I talked about 2020. You had President Trump, who'd been a big enemy of OPEC — as much a foe of OPEC as he was of China. If you read his books and speeches: they're a cartel, they're evil, etc. Well, in 2020, when the oil price was collapsing, as I mentioned earlier, it started to put the US shale business out of business. So suddenly Donald Trump realized — wait a minute, just as my book would show — we need OPEC. We need somebody in there stabilizing the price. And so Donald Trump became an OPEC Achievement Award winner in 2020. He actually organized a deal between Russia and Saudi Arabia to get them to cut production. When does an American president ask OPEC to cut production to raise prices? Not very often. But Trump did it.
And that gets to this tension between — and I share very much a free-market orientation toward most things, and a limited-government view — but, on the other hand, the reality is that oil prices are wildly volatile if there isn't some sort of supply manager. And for something as important as 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 that 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 in order to get out of there. I wanted to be a history teacher. But it won the International Association for Energy Economics book award in 2023. So I'm sure my professor was probably rolling over in his grave at that one. But you never know where your life is going to lead.
Alan Fleischmann
That's amazing. And that book continues to be something people talk about.
Bob McNally
People ask about it. I get a lot of young folks, especially. I wrote it for the non-energy expert — someone who's interested in energy and wants 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 — I have a lot of friends who teach who say they assign it — and I've had young folks come in and praise it in the highest terms. I couldn't be happier. I have endorsements from Dan Yergin, Paul Tudor Jones, and Scott Sheffield, and I'm just very honored. So yeah, it seems to be wearing well so far.
Alan Fleischmann
We could talk now about how you publish, how you're interviewed in Bloomberg, Foreign Affairs, The Economist, the Financial Times, and CNN, how you testify in Congress — energy markets and policy. But I think we all assume that's what Bob McNally does. What people don't assume is that you're also a big kid, I'd argue, around Washington — performing in bipartisan local bands whose members have included several members of the Bush administration. I know Andy Card, the former White House Chief of Staff under President Bush, and Josh Bolten, another good friend who's been on the show, the former White House Chief of Staff under President Bush and also CEO of the Business Roundtable. And I think Dan Poneman, who was Barack Obama's Deputy Energy Secretary, and the current Secretary of State, Tony Blinken, performed with you as well.
Give us a little background here. I should declare myself a fan — a groupie, I guess. Tell us how that all started. You've always been a drummer, but how did it start? You've had many band names over the years; I remember the Compassionate Conservatives was one of them. Tell us about that. If that isn't a great example of bipartisanship in Washington, I don't know what is.
Bob McNally
You're right, Alan, thank you. I am a drummer; I've been a drummer all my life. It's important that your listeners know there's this subculture in Washington of bipartisan energy, foreign affairs, and intelligence-community rock-and-rollers, and I'm honored to be part of it and having a blast. So Josh Bolten — both of President Bush's chiefs of staff were in my first band. We'd always have Secret Service protection; they'd show up at my house in Bethesda and ring the house when we practiced. Andy Card played the trumpet, and Josh Bolten is a fantastic bass player. His daughter, Tabitha, was in our band and sang and played keyboards, and we still play together. We called ourselves BAD — Budget Attention Deficit Disorder — and then we called ourselves the Compassionate Conservatives. We played the South Lawn of the White House twice, and the Congressional band got angry that we got all the press; Josh had to apologize to the members of Congress, bipartisan, who felt 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.
My main band — and you can appreciate the name — is Sound Policy, and we just had a gig; it's pretty muscular hard rock, fabulous. President Biden's National Security Council director for climate change and clean energy is our lead singer, Miriam D'Onofrio, and she's a powerhouse. Miriam and I are also in another band that fights breast cancer called Pink Noise — that's the one with Dan Poneman. We just had practice. By the way, we'll be having our next performance in DC, either September 3 or 4, so stay tuned; we'll be getting that out on social media. And as you said, Tony Blinken, who's an outstanding guitarist and singer, has played several times with Pink Noise. When I was a drummer with him — and once when I wasn't on drums, I got to play with him — he did some Robert Palmer covers, sang and played, and he's a great musician. I hope we can get him back when we play in September. So yeah — rock and roll, and energy is rock and roll, I should say. Drumming is my release.
Alan Fleischmann
Any Washingtonians you haven't played with that you want to?
Bob McNally
Ah, I'll have to think about that. None come right to mind among folks still in Washington. I'll have to give it some thought. But one person we were honored to play with is Jeff "Skunk" Baxter, from the Doobie Brothers and Steely Dan. We played a fundraiser during the Iraq War, where we were beaming out at Walter Reed, playing outdoors for wounded soldiers, and beaming our performance to an infantry unit in Iraq at the time. Getting to play "China Grove" with a member of the Doobie Brothers was a huge honor.
Alan Fleischmann
Tell me a little about the advice you give. You're the father of three beautiful young adults, you're an uncle, you're the employer of several. When you look at this very uncertain world right now — with all the fearful things, from challenges to our climate to challenges to our society to divisiveness — what do you tell young people? 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 make capitalism work, or a thought leader? How do you figure out what to say to those who may want to follow you and be an entrepreneur, or who look at you and want to jump into the energy field, or who look at you as someone who tries to move the agenda of change forward? What do you tell young people? Because I'd 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, but as you know, I see things in historical and cyclical terms. 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, I think we've been very fortunate to have lived in what, in retrospect, has been a pretty positive trajectory. It didn't seem easy and carefree along the way, but if you think about the last 40, or even 80, years — since World War II, our parents' time — coming up in our generation, you could look to government and see that it did things: it won wars, it built highways, it sent a man to the moon, it won the Cold War, it inspired people around the world. The economy was growing; countries were recovering. It was easier to be optimistic and to share that optimism.
But cycles come to an end, and I fear we're coming to the end of a more-or-less four-generation cycle. You have to go back to World War II, and then 80 years before that to the Civil War, and 80 years before that to the Revolution. I think we're coming to an era where it's going to be difficult. Just as it was for the World War II generation — your dad's generation, who had their difficult period in their youth and then grew into a happier time — I think our children are in a similar situation. It's hard to be terribly optimistic over the next few years about stability, because the trends that are polarizing us are, I think, really unstoppable and structural. They have to do with the jobs the government has taken on, the entitlement programs, trying to do a lot of things with debt. We've been riding an easy-debt wave for 40 years — interest rates going down, inflation going down, everyone, bipartisan, running up the debt. Those days are coming to an end. The end of the Cold War is ancient history, and the end of the end of the Cold War looks like it's ending; we have real challenges from China, Iran, Russia, and so forth. And we won't even talk about what's going on domestically.
So you have to be real. That's the thing — I don't like to sugarcoat things. You have to be real with your kids and with young folks: we are going into difficult times. This is not a time to be in debt. It's not a time to be in a precarious situation of any kind. You want to be in friend groups and professional groups, and to live within your means. You want relationships that are important, because during these tumultuous periods it's about relationships, family, and local communities. Getting through these things is going to be difficult, and you have to examine your core 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 — to examine, whether it's faith or 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. 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. I may have my own views about what I'd like to see after that, and they may differ from yours or others' — we all differ. But nothing's more important — you mentioned being an uncle — than this: I try not so much to tell as to live by example. You and Daphna are aunt and uncle to our children, and I'm a proud uncle to yours, and I hope, in the way we live our lives and act, both professionally and personally, that we're teaching them that, despite what you see out the window, it's not about personal vitriol or ad hominem attacks. People are not bad people because they have a different faith, a different skin color, or a different political orientation. I try to live the life we have at my firm — right, left, MAGA, progressive — where we all get together and everyone works well together, because we all have a mission. So I try to teach by example, not so much by lecturing, that that's the way to live. That's going to become more important as the centrifugal forces I think are structural — economic, political — really rip apart our country. And then we're going to have to put things back together again. It's our young kids who are going to be doing that, just as your dad's generation did after they had to serve through World War II.
Alan Fleischmann
So are you optimistic?
Bob McNally
I am optimistic. But, like my father used to say when we'd be driving to Cape Cod and we'd ask, "How much longer, Daddy, until we get there?" he would say, "It's going to get worse before it gets better." But yes, I'm optimistic. The American story is an upward arc. Condoleezza Rice said it's an arc that bends toward freedom. I think we're going to do the right thing, and I think we're going to come out better. But it's going to be a pretty wild ride between now and then. Yeah, I'm hopeful. You've got to be optimistic to be an American.
Alan Fleischmann
What's next on the horizon for you and for Rapidan?
Bob McNally
Well, let's see. As we get to the 10-year anniversary of my book, I want to think about doing an update — maybe a new edition with some new material. I'll see how well the thesis has played out over the intervening 10 years. I also think — I've been waiting since the 1990s, as you know, to write a book about this cyclical view of history, "America 4.0," and its implications for energy and climate policy. So I'm gearing myself up for maybe another book project. But I really want to keep growing Rapidan; we're doing very well, and that's taking a lot of my time. Other than that, it's just learning more songs. I especially love the young people in the bands — they're bringing me songs I've never heard of, this new music, and it keeps your brain young when you have to learn a new song and a new part. So I just want to keep playing, keep on with energy, maybe write some more, and see what comes.
Alan Fleischmann
That's amazing. Well, you've been listening to Leadership Matters. I'm your host, Alan Fleischmann. We've spent the last hour with Bob McNally, the founder and president of Rapidan Energy Group and an award-winning author. He's a great friend, a role model, and honestly one of the smartest people I've ever known. More importantly, he's one of the finest people I've ever known, and he's 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 the sequencing of things in life — but we do agree on all the things that really matter. As a leader, I look to him for advice, and as someone I admire who gives advice to CEOs and is a CEO himself, he's one of the great shining examples of private-sector ingenuity, and one of the finest people who serve our country at that intersection of private, public, and civil society. I'm 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 so many fascinating parts of your journey, and I know, in your case, the best is yet to come.