Friday, 14 October 2022

"Global economies are facing a potential energy shock..."

"Global economies are facing a potential energy shock—the third such shock of the past half century. Energy costs and security have returned to centre stage, as has the realisation that the world remains deeply dependent on reliable supplies of petroleum, natural gas, and coal....
    "Advocates of a carbon-free world underestimate not only how much energy the world already uses, but how much more energy the world will yet demand. There are more people, more wealth, and more kinds of technologies and services than existed when President John F. Kennedy faced the Cuban Missile Crisis in 1962, and 60 years later, global energy consumption has risen more than 300%. In the future, there will be yet more innovations and more people, many of whom will be more prosperous and want what others already have, from better medical care to cars and vacations. In America, there are nearly as many vehicles as people, while in most of the world, fewer than 1 in 20 people have a car. More than 80% of the world population has yet to take a single flight. Drug manufacturing is far more energy-intensive than fabricating cars or aircraft, and hospitals use 250% more energy per square foot than commercial buildings."

1 comment:

Mark Hubbard said...

Not only that, but what the Europeans haven't figured out, and it's astounding incompetence - as they turn off their nuclear and became dependent on a tyrant for their gas: you need reliable base load to run a grid: wind and solar is no where near reliable for that. There has been nil planning by politicians.

Ten years ago 82% of the world's power was supplied by fossil. Ten years later, and over US$4 trillion spent on renewables, 81% of world power is still reliant on fossil, but there's not been the capex required to extract it. So, there will have been an increase in energy consumption over that decade taken up by renewables, but it's still woeful, and again, could never be used for base load.

All of which has created a great opportunity for the next decade:

My portfolio:

DVN:NYSE HAL:NYSE (Halliburton will clean up as oil and gas fields try to extract as much as they can) XOM:NYSE CQP:AMEX (for US LNG hub into Europe), ARLP:Nasdaq (US coal into Europe) and WDS:ASX for oil and gas. Nuclear will come back, so LEU:AMEX UUUU:AMEX adn PDN:ASX. All ethical investments because they will be keeping people, especially Europeans, alive through their coming winter. Also, if you want to be making the tech and the ethical weapons to be keeping bad buggers in check, NOC:NYSE - basically a recession proof company.

Most equity markets are down over 20% right now, bond markets down with them, that portfolio is on 6.82% since April (within that DVN up 33%, HAL up 18%) with on current oil/gas prices double digit dividend yields coming from huge free cashflows for some years yet, I think. And because fossil extraction is so capital intensive all the existing extractors take all the future cashflows with virtually no new competition.

The only clouds in all the above is the decimated NZD which makes buying US firms right now pretty hazardous. Plus our market distorting and plain unjust FIF tax regime which taxes capital gains on overseas shares (compared to NZ/ASX shares if you're not a trader), but does not give a deduction for capital losses ... only Cullen could have invented something as fraudulent as that.