Analysts question the transition to green energy as oil and gas prices soar


Investors continue to load fossil fuel companies while avoiding clean energy

News analysis

Oil prices are once again in the spotlight, and their watchers and markets consistently show that more commodities are needed now, regardless of the government’s envisioned green transition.

The price of West Texas Intermediate (WTI), the US crude oil benchmark, is 7 years hikeH on February 4th it exceeded US $ 92 a barrel. That same day, Bloomberg reported that gas prices across Canada set a new record high. National average retail fuel price Based on data from the fuel price tracking site gasbuddy.com, there is data dating back to 2008 at $ 1.516 per liter.

But Canadian affordable energy president and former Liberal Party lawmaker Dan McTig said the problem was inherently more fundamental, before Russia resumed its attack on Ukraine, or before the cold weather spell hit it. He told the Epoch Times that prices had already risen.

“This is a product of a very short supply, mainly caused by a shortage of investment or a deliberate strangulation of capital investment. [capital expenditures] Must be produced [oil and gas],” He said.

McTigue Said Gasoline prices in Ontario are heading towards $ 1.75 per liter. This is 10 cents higher than what he predicted in December about what the price would be between the end of February and the beginning of May.

“What this really means is that people can’t do without fossil fuels, so people have to … grasp and start to become a reality.”

And this also applies to the manufacture of electric vehicles (EVs), McTeague points out.

EV growth is skyrocketing given rising gas prices and the government’s ongoing efforts to build charging infrastructure.

But energy analysts Jackie Forrest and Peter Teltazakian said at the ARC Energy Institute on February 1. Podcast Demand for internal combustion engines is not exactly declining, and EV growth will take some time before it hits the combustion engine user base.

“You are looking at the wrong metric, for example, the growth of electric vehicles. You need to consider the retirement of internal combustion engine vehicles being brought out of the fleet,” said Tertzakian. He added that the number of retirements is actually declining rather than increasing.

He provided his predictions of when oil demand would subside.

“It will take a long time for the oil demand curve to roll over. Optimistically, it will be around 2030.”

The market knows what they like

The stock market also clearly shows where they think future returns come from. Over the past year, traditional energy stocks have far outstripped the market and have completely destroyed the significantly lagging green energy stocks.

Several S & P 500The top winners over the past year have been oil stocks like Devon Energy. 160 percent, Marathon oil is up over 130%, ConocoPhillips is up close to 100%, EOG resources are up over 85% and Occidental Petroleum is up close to 60%. The two biggest names, ExxonMobil and Chevron, have risen by about 55% and 50%, respectively.

Just at JanuaryEnergy is the top performer on the S & P 500, up 19% month-on-month, but the overall index fell just over 5%.

On the Toronto Stock Exchange, 2022 continued to be a good year. Energy sectorBecause it has increased by about 17% since the beginning of the year The entire market Almost unchanged.

By comparison, WilderHill New Energy Global Innovation Index It has decreased by more than 15% since the beginning of the year and by more than 40% last year.

McTeague says this shows that the market is saying that clean energy stocks and green transitions are only feasible with large grants.

“The only way they can do it is with a lot of government subsidies, a lot of public taxation, and significant market distortions.”

Helima Croft, Global Head of Commodity Strategy at RBC Capital Markets, BNN Bloomberg On February 7, there was a question about the transition to green energy. “In the medium term, we may be so focused that we may not be able to get enough investment in the products we need today. Transition?”

At the ARC Energy Institute PodcastTertzakian commented:

Canada is less attractive to foreign capital

The Canadian Petroleum Producers Association (CAPP) 22 percent increase CAPP is expected to increase capital investment in this sector by $ 6 billion to $ 32.8 billion as Canadian producers seek to take advantage of high prices.

However, investment in oil sands has plummeted over the years due to environmental, social and governance (ESG) factors. Foreign companies are dismissing or shrinking their businesses, and those that continue to do business distribute high dividends to shareholders rather than using them for exploration or production.

“In the context of global investment, Canada continues to lose market share over other jurisdictions,” CAPP said. January 20 statement..

CAPP was crude oil in 2014 Finally exceeded US $ 100 per barrelCanada is considered “a top-class international investment jurisdiction for resource development” and has attracted more than 10% ($ 81 billion) of the world’s upstream natural gas and oil investment. Today, Canada’s market share has fallen to just 6%, based on the forecast that total global upstream investment will reach $ 525 billion in 2022, CAPP said.

“I’ve seen it unable to attract capital to this country, and I think it’s very dangerous,” McTieg said.

Given the urgent and ongoing need for oil, low levels of capital investment in oil sands are a bad time. McTigg says he’s worried that the average Canadian could make ends meet while fighting a losing battle.

Not only that, McTigg adds that the green transition is empowering Russia and China.

“Green narratives are a luxury cost that none of us should or have to pay, and because countries like Russia and China are not ready to go this awakened path. Laughing at us. “

Rahul Vaidyanath

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Rahul Vaidyanath is a journalist in The Epoch Times of Ottawa. His areas of expertise include economics, financial markets, China, national defense and security. He has worked at the Bank of Canada, Canada Mortgage and Housing Corp., and investment banks in Toronto, New York and Los Angeles.



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