Investing

Oil investors at pivot point this summer as clean energy surges

David Callaway

Published: June 16, 2023 4:09 am

Last Updated: June 16, 2023 10:30 am

The party in oil and gas stocks that started last year after Russia’s invasion of Ukraine is clearly over this summer, as clean energy development surges and the stock market moves on to the next big thing, which is AI. But don’t tell that to the oil companies.

Despite the International Energy Agency’s declaration this week that global demand for oil could peak before the end of this decade (after rising each of the next five years), most oil majors are keeping the pressure on the pumps, hoping to wring every last dollar out of their fields before the transition becomes too great.

Shell $SHEL this week became the latest to confirm its intentions to keep drilling “stabilized,” saying it would buy back shares, increase its dividend and do everything it can to keep the party rolling while demand is still up.

New Shell CEO Wael Sawan told investors in New York that the company will still invest $10 billion to $15 billion in low-carbon solutions, such as biofuels, but that is a pittance compared to what his rivals in Europe, such as BP $BP , are investing in preparation for a revolution in wind and solar power.

Sawan and other oil executives know they will have to transition at some point, likely in the span of their own careers, but like bar-goers at closing time, they can’t resist just one more turn at the tap before the lights go out. Investors might be better prepared. They’ll take the corporate handouts but are already hedging their bets. The iShares U.S. Oil and Gas ETF $IEO is down 11% so far this year. . . .

Your ESG fund may beat the market for reasons that have nothing to do with ESG

. . . . Environmental, social and governance (ESG) funds are hot again as the market picks up, but not because of their commitment to mitigating climate change, writes Mark Hulbert. According to a new study, ESG funds are loaded with growth stocks, which may be no surprise given that they lean toward tech companies. But with growth strategies currently in favor over value strategies, any fund with growth stocks in it will do better, no matter what it’s stated mission. Hulbert questions what this means for the ESG sector when the cycle inevitably turns back to value. . . .

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The promise, opportunity and challenge of green hydrogen

. . . . More than 1,000 projects are currently underway around the world to develop green hydrogen as a renewable energy source, with more than $30 billion of investment to date, writes Marsha Vande Berg. That’s a far cry from the estimated $20 trillion that will be needed by 2050. Vande Berg lays out in this special report the challenges, the players, and the race among countries such as China, Japan and Australia to develop green hydrogen and fusion technology, including with help from President Biden’s Inflation Reduction Act. . . .

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Thursday’s subscriber insights

Solar power beamed from space? Yes Scotty, it’s a reality

. . . . The hunt is always on for the next form of renewable energy. And now there is a breakthrough — and financial backing — for a Star Trek-like technology: beaming solar energy from space.

The California Institute of Technology said this week it has successfully transmitted energy gathered from solar panels in space back down to Earth. If successful, then like nuclear fusion, it could lead to an entirely new energy source, independent from the restrictions on terrestrial solar, such as cloudy days and nighttime. Can it work? Read more here. . . .

U.S. pumps $192 million into battery recycling to foster startups

. . . . Yes, batteries for electric vehicles and power storage are essential to fighting climate change. But when they lose their effectiveness, what then? That’s why the DOE is pumping in $192 for research on how to recycle them.

As investors scour the globe for commodity plays in lithium and other minerals for batteries, a new class of startups in recycling could soon emerge, reflecting surging demand for EVs and all things battery. Read more here. . . .

BlackRock launches two more ETF climate funds

. . . . The anti-ESG backlash in the U.S. has cast a pall over new ESG products, but BlackRock $BLK bucked the trend this week when it launched two new climate ETFs, one in the U.S. and for investing in Japan.

The two funds, which seek to mimic MSCI Climate Action Indexes of companies reducing harmful carbon emissions, were started with an anchor investment of $3 billion from Finnish pension giant Illmarimen.

They launch amid a summer rally in the U.S. stock market and a major rise in Japanese stock prices that have propelled the country’s Nikkei 225 stock index to its highest levels in 30 years. As a signal that the latest rise in stocks could be a new bull market, new ESG products cannot be overlooked. . . .

Editor’s picks: It’s a buffalo jam; plus, the Army’s going greener

Welcome back to Yellowstone. Follow us.

On the morning of June 13, 2022 — a year ago this week — heavy rainfall combined with snowmelt to swamp Yellowstone National Park in a 500-year flood event. The flood destroyed several sections of the North Entrance Road between Mammoth Hot Springs, Wyo. and Gardiner, Mont., and three sections of the Northeast Entrance Road between Lamar Valley and Cooke City/Silver Gate, Mont. Much of the park’s infrastructure also was severely damaged, buildings were washed away, and wastewater lines destroyed. While parts of the park were reopened soon after, the construction and repair work has continued throughout this past year. This summer visitors are welcome back to all but a few locations; the Mammoth Hot Springs Hotel remains closed. Check out everything you need to know to plan a visit and how to support the nation’s oldest national park.

Marching orders for the U.S. military: clean energy, clean environment

The Pentagon is under pressure to transition to clean energy, deal with energy security issues and clean up contaminated military installations. That’s an order. The House Armed Services Committee released sections of its fiscal 2024 National Defense Authorization Act this week, and it includes mandates for the Department of Defense to ramp up energy and environmental support, reports E&E News. According to the report, lawmakers in the document touted the benefits of clean, reliable energy for military operations, in one instance calling nuclear microreactors “critical to the future fight.” The proposed legislation also “would also increase funding for energy conservation and resilience, proposing more than $500 million in funding for energy-saving projects on military bases across the country, as well as in South Korea and Kuwait. Last year, House lawmakers proposed roughly $350 million for that purpose.”

Explain that: Carbon dioxide capture, utilization and storage

. . . . CO₂ is a naturally occurring gas, and also is a by-product of burning fossil fuels (such as oil, gas and coal), of burning biomass, of land-use changes and of industrial processes (e.g., cement production). According to the UN IPCC glossary, “it is the principal anthropogenic greenhouse gas, or GHG, that affects the Earth’s radiative balance. It is the reference gas against which other GHGs are measured and therefore has a global warming potential of 1. Carbon dioxide capture and storage, CCS, is a process in which a relatively pure stream of CO₂ from industrial and energy-related sources is separated (captured), conditioned, compressed and transported to a storage location for long-term isolation from the atmosphere. Sometimes referred to as carbon capture and storage. Carbon dioxide capture and utilization, or CCU, is a process in which CO₂ is captured and then used to produce a new product. If the CO₂ is stored in a product for a climate-relevant time horizon, this is referred to as carbon dioxide capture, utilization and storage. Only then, and only combined with CO₂ recently removed from the atmosphere, can CCUS lead to carbon dioxide removal. CCU is sometimes referred to as carbon dioxide capture and use.”. . .

Words to live by. . . .

“These trees are magnificent, but even more magnificent is the sublime and moving space between them, as though with their growth it too increased.” — Rainer Maria Rilke.