The CEO of Shell has told the BBC that cutting oil and gas production would be “dangerous and irresponsible” because the switch to renewable energy is not happening fast enough. It would result in energy bills rocketing higher again.
The slow energy transition was also obvious from a recent report from the Energy Institute that notes that the consumption of crude oil continued in 2022. Although coal consumption fell in North America and Europe, overall global usage increased by 0.6% due to higher demand in India and China (see last week’s Investors Chronicle for more details).
It is very clear that demand for energy is still rising and that the alternative uses of oil/gas in industries such as plastics production and fertilizer production cannot be easily replaced.
The Just Stop Oil promoters are simply ignorant of the consequences of their campaign. See the book “How the World Really Works” which I reviewed for more explanation of the reality – see https://roliscon.blog/2022/02/14/how-the-world-really-works-book-review/ .
It is very clear that so far as investors are concerned, we should not be dashing headlong away from investment in major oil and gas companies. The world’s reliance on them is not disappearing and is actually growing regardless of the hectoring of politicians and environmental campaigners.
Moving to alternative energy sources for some applications and sectors of the economy, or reducing energy consumption by improved building insulation, may make sense but they are only partial solutions and may only have a major impact in decades in the future, i.e. in longer time horizons than most investors.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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This is an investment opportunity. I want to own coal and oil producers which are based legally and physically in countries which will not use political pressure to influence commercial decisions about production (the countries need not be politically stable, they just need to be likely to continue to allow production and export). I want companies with proven exploitable resources with high EROIE ratios, who have a history of looking after their shareholders. And at the same time I want to get as much money as possible out of the UK and into offshore structures (legally) because our current and most likely successor governments are going to make us all poorer and colder. I am still trying to work out whether that is intentional or simply because the people in charge know nothing about physics, math, geology or engineering. That’s the biggest puzzle at the moment. Are our leaders simply stupid, or is there more to it than that?
I think our leaders are being swayed by the opinions of the ignorant.
I’ve been wondering a lot about leaders and leadership recently including political leaders, the top civil servants, and the heads of some businesses. I don’t know whether they are listening to idiots but I do get the impression that there’s not enough careful thinking and analysis put into some of the big decisions, especially when engineering and physical resources are concerned. A lot of leaders seem to be flying by the seat of their pants rather than using instruments, which is fun in VFR and CAVOK but suicidal when the weather turns and you become unsure of your position. I don’t want to be too political but I think it’s generally agreed that the decision to accelerate Net Zero during Boris Johnson’s tenure as PM was made without there being any plan for how it would be achieved beyond a vague idea that “everything” would be electrified. When Johnson flew in an Airbus from Northolt to Newquay to attend the G7 bunfight he was asked how his flight aligned with Net Zero and he responded that his policy was “Jet Zero”. He had earlier said in parliament that there would be electric aeroplanes. I thought that exemplified the lack of any detailed engineering assessment of the things that would have to alter as a result of the Net Zero policy. Now that all the political players have latched on to it we must assume that they will keep going until they either succeed or the results are quite severe, possibly even catastrophic. That is a large part of the reason why I want to get as much as possible out of the UK and why I like investments in coal and oil producers who will be able to continue production. Our leaders may not understand why we will need coal and oil for at least another generation or two, but I do, and I am investing accordingly.
By the way, I hope your consultant doesn’t persuade you to clock off. I enjoy reading this blog.