Servus together,
For a long time now, people have been talking about the energy turnaround and that it will come. But from an investor perspective, does it make sense to invest in or invest heavily in stocks that represent the transition? What is your opinion?
I would take the opposite position and say that renewable energy and the transition to it are still a long way off and the investment is very speculative. Investors are therefore better served with companies from the oil and gas industry. Just recently, the IEA reported that global oil consumption has reached a new oil consumption has reached a new high (1), although 2019 was supposed to be a turnaround - meanwhile, there are studies that speak of 2026 or 2035 as the new peak (2) & (3). Furthermore, the strategic oil reserves of the USA are at a historic low and will (presumably) need to be replenished after the U.S. presidential election (4) - consequently, there is no need to subsidize oil prices in one of the largest economies. Further aggravating the current situation are the OPEC+ countries countries, which have recognized that oil is a limited resource and that it is more lucrative to keep to keep production low and the price high (5). (5). Furthermore, the Handelsblatt, for example, states that in the future we will be faced with an excess demand for oil in the future (5):
"In a study, the U.S. investment bank Goldman Sachs calculates that the world will have to get by with ten million barrels of oil less per day by 2025 because the industry has not invested enough since 2014. The amount mentioned corresponds to the daily production of the world's second largest oil producer, Saudi Arabia."
I also think that our friend Buffett has already recognized these challenges in 2019. At that time, Buffet invested an additional USD 10 billion in $OXY (-0,87 %)so that the company could emerge victorious from the bidding process against $CVX (+2,24 %) for an oil field and thus secure strategic reserves. Little info on the side: Oil and gas producers now account for more than 10% of Buffet's stock portfolio. (6).
My thesis: Oil prices will continue to stabilize initially and later rise disproportionately as production declines. Consequently, oil giants will evolve into companies with higher margins than today (7). On the other hand, companies that are too committed to the energy transition will face declining margins and strong competition (8).
I look forward to your opinions and a good exchange!
Greetings
JRow
My favorites remain:
(1) https://www.iea.org/reports/oil-market-report-july-2023#
(2) https://www.iea.org/news/growth-in-global-oil-demand-is-set-to-slow-significantly-by-2028#
(3) https://www.sec.gov/comments/s7-10-22/s71022-20129438-295567.pdf
(4) https://www.eia.gov/todayinenergy/detail.php?id=54359
