Want to save the planet? Invest in oil and gas stocks instead of indirectly supporting OPEC & Russia
July 18th 2021
Article by Martin Pelletier from Financial Post on July 16, 2021.
Martin Pelletier: Imagine how much emissions could be reduced if Canada exported LNG to replace all the coal-fired generation in China
Now that we finally appear to be entering a post-COVID-19 world, developing countries are moving on to the next so-called crisis and refocusing their efforts on the climate-change agenda.
This is no doubt a worthwhile and critical cause, but there appears to be an even greater sense of urgency than there was pre-pandemic. Almost as if the world will come to a cataclysmic end if we don’t immediately enact all-or-nothing conversion of our economies.
At first, I didn’t understand why COVID-19 was a catalyst for the tulipomania in the clean energy space, which includes solar and electric vehicles (EV), but now it makes a lot of sense. Investors were simply following both government policy and trillions of central-bank-supported borrowed money sneaking in under the Build Back Better banner.
Suddenly, the mighty EV is our path to salvation, with many jurisdictions going so far as to eventually ban the sale of internal combustion engines, including Prime Minister Justin Trudeau’s recent announcement that this will occur in Canada by 2035.
On the surface, this makes a lot of sense. Transportation is the largest contributor to greenhouse-gas emissions in the United States at 29 per cent, according to Environmental Protection Agency data. However, few in the U.S. seem willing to consider the magnitude of converting all of the country’s massive electrical grids, which are 62 per cent powered by fossil fuels and, as a result, are the second-largest contributor of GHG emissions at 25 per cent.
Will such an aggressive binary approach yield the greatest results or simply put many off? Especially considering there appears to be little reprieve in the climate-change agenda even though we’re just coming out of being locked down for a year and a half.
More so, such an approach sows the seeds for a number of unintended consequences that if we’re not careful will make us fall short of the ultimate goal of materially reducing global emissions.
One such consequence is the dramatic increase in the cost of living for those on Main Street who don’t have inflation-adjusted pension plans and salaries, as those in government and academia responsible for such policies do. Perhaps this is why U.S. President Joe Biden was complaining about rising oil prices last week to the Organization of the Petroleum Exporting Countries.
Costs will only get worse since shale oil both fuelled strong economic growth in the U.S. economy and provided a ceiling on pricing, allowing for affordable energy for its citizens.
Things have changed a lot since shale’s heyday, though. Instead of strategically using the wealth from this tremendous resource to transform its economy into a cleaner one while keeping energy costs affordable, the U.S. government is choosing to relinquish its domestic production capabilities to less favourable jurisdictions within OPEC.
OPEC, of course, is more than happy to oblige, especially since demand levels have returned back to pre-pandemic levels.
Meanwhile, Europe has recently ramped-up its coal-fired electrical generation by 10 to 15 per cent due to natural gas shortages following a longer-than-normal winter that depleted reserves. Fortunately, Russia and President Vladimir Putin are coming to the rescue via the Nord Stream 2 pipeline.
At the same, Europe seems all too willing to risk trade wars by invoking carbon tariffs on imports, adding fuel to the inflation fire for its citizens.
It’s a shame that Canada appears to be taking the same approach as the U.S. and Europe, missing a tremendous opportunity to help bridge the transition gap in the transformation of energy grids in countries such as China.
Just 25 “mega-cities” produce more than half the world’s urban GHG emissions, according to a recent report by researchers at Sun Yat-sen University in China. Guess where 23 of those cities are located?
Imagine how much GHG emissions could be reduced if Canada exported liquefied natural gas (LNG) as a means to replace all the coal-fired generation powering these mega cities. Wouldn’t it be interesting to compare those numbers against the GHG reductions from imposing a carbon tax on Canadians?
This situation is only going to get a lot worse before it gets better, since the global demand for oil and natural gas continues to rise and supply falls, sending prices even higher. For those without a golden defined-pension plan or inflation-hedged tenured salary, perhaps it’s worth investing in the few public oil and gas stocks remaining, instead of buying a $50,000 EV ultimately powered by coal or natural gas supplied by OPEC or Russia.
Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.), a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax and estate planning.
Article link
https://financialpost.com/investing/want-to-save-the-planet-invest-in-oil-and-gas-stocks-instead-of-indirectly-supporting-opec-and-russia
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Martin Pelletier: Imagine how much emissions could be reduced if Canada exported LNG to replace all the coal-fired generation in China
Now that we finally appear to be entering a post-COVID-19 world, developing countries are moving on to the next so-called crisis and refocusing their efforts on the climate-change agenda.
This is no doubt a worthwhile and critical cause, but there appears to be an even greater sense of urgency than there was pre-pandemic. Almost as if the world will come to a cataclysmic end if we don’t immediately enact all-or-nothing conversion of our economies.
At first, I didn’t understand why COVID-19 was a catalyst for the tulipomania in the clean energy space, which includes solar and electric vehicles (EV), but now it makes a lot of sense. Investors were simply following both government policy and trillions of central-bank-supported borrowed money sneaking in under the Build Back Better banner.
Suddenly, the mighty EV is our path to salvation, with many jurisdictions going so far as to eventually ban the sale of internal combustion engines, including Prime Minister Justin Trudeau’s recent announcement that this will occur in Canada by 2035.
On the surface, this makes a lot of sense. Transportation is the largest contributor to greenhouse-gas emissions in the United States at 29 per cent, according to Environmental Protection Agency data. However, few in the U.S. seem willing to consider the magnitude of converting all of the country’s massive electrical grids, which are 62 per cent powered by fossil fuels and, as a result, are the second-largest contributor of GHG emissions at 25 per cent.
Will such an aggressive binary approach yield the greatest results or simply put many off? Especially considering there appears to be little reprieve in the climate-change agenda even though we’re just coming out of being locked down for a year and a half.
More so, such an approach sows the seeds for a number of unintended consequences that if we’re not careful will make us fall short of the ultimate goal of materially reducing global emissions.
One such consequence is the dramatic increase in the cost of living for those on Main Street who don’t have inflation-adjusted pension plans and salaries, as those in government and academia responsible for such policies do. Perhaps this is why U.S. President Joe Biden was complaining about rising oil prices last week to the Organization of the Petroleum Exporting Countries.
Costs will only get worse since shale oil both fuelled strong economic growth in the U.S. economy and provided a ceiling on pricing, allowing for affordable energy for its citizens.
Things have changed a lot since shale’s heyday, though. Instead of strategically using the wealth from this tremendous resource to transform its economy into a cleaner one while keeping energy costs affordable, the U.S. government is choosing to relinquish its domestic production capabilities to less favourable jurisdictions within OPEC.
OPEC, of course, is more than happy to oblige, especially since demand levels have returned back to pre-pandemic levels.
Meanwhile, Europe has recently ramped-up its coal-fired electrical generation by 10 to 15 per cent due to natural gas shortages following a longer-than-normal winter that depleted reserves. Fortunately, Russia and President Vladimir Putin are coming to the rescue via the Nord Stream 2 pipeline.
At the same, Europe seems all too willing to risk trade wars by invoking carbon tariffs on imports, adding fuel to the inflation fire for its citizens.
It’s a shame that Canada appears to be taking the same approach as the U.S. and Europe, missing a tremendous opportunity to help bridge the transition gap in the transformation of energy grids in countries such as China.
Just 25 “mega-cities” produce more than half the world’s urban GHG emissions, according to a recent report by researchers at Sun Yat-sen University in China. Guess where 23 of those cities are located?
Imagine how much GHG emissions could be reduced if Canada exported liquefied natural gas (LNG) as a means to replace all the coal-fired generation powering these mega cities. Wouldn’t it be interesting to compare those numbers against the GHG reductions from imposing a carbon tax on Canadians?
This situation is only going to get a lot worse before it gets better, since the global demand for oil and natural gas continues to rise and supply falls, sending prices even higher. For those without a golden defined-pension plan or inflation-hedged tenured salary, perhaps it’s worth investing in the few public oil and gas stocks remaining, instead of buying a $50,000 EV ultimately powered by coal or natural gas supplied by OPEC or Russia.
Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.), a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax and estate planning.
Article link
https://financialpost.com/investing/want-to-save-the-planet-invest-in-oil-and-gas-stocks-instead-of-indirectly-supporting-opec-and-russia
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