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Investors Are Steering Away From Oil & Gas

October 14, 2021
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By Paul Homewood

 

This item appeared in the Wall Street Journal’s daily 10-point guide to the top stories yesterday.

It goes to the heart of the energy crisis:

 

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Large swings in energy markets are nothing new. Because demand is so inelastic, even small changes in either supply or demand can cause big price changes.

We saw similar price spikes in the oil and gas markets in the years leading up to the 2008 financial crash. Indeed, it was arguably those price rises which triggered the crash. The cause of these rises was the increased demand from Asia, as China and other economies there began their rapid growth, thus increasing demand for energy.

Normally the energy market reacts by increasing capital spending to increase output. After 2008, it did just that, and, as tends to happen, the market swung the other way with surplus production and prices falling to economically unviable levels a few years ago.

However, this time around energy companies appear to be more reluctant to commit to new investment, as the WSJ notes, thanks to a combination of shareholder and government pressure, share buybacks and the easy money to be had from heavily subsidised renewable energy.

We have a similar situation in the UK and Europe, with companies like Shell keen to move away from oil and gas, along with political pressure to block North Sea oil development.

It is absolutely clear that, despite climate policies and renewable energy, global demand for fossil fuels will remain high, and probably increase, for at least the next decade. But if new investment does not come forward to maintain output levels, energy markets will become tighter still, driving up prices to crisis levels.

The knock on effect this will have on the world’s economy could be frightening.

21 Comments leave one →
  1. bluecat57 permalink
    October 14, 2021 12:20 pm

    Buy low, sell high.

  2. October 14, 2021 12:23 pm

    “preferring to make new investments in solar energy, wind or other sources that aren’t as damaging to the environment”!! What planet are they on?? Do they not realise how many hundreds or thousands of tons of raw material needs to be mined, refined and transported to make 1 ton of a rare earth metal for use in a turbine, all powered by diesel, and all the energy required to manufacture and install the turbine including the huge amount of steel and concrete, and the mass of oil lubricants to keep it working??

    • matt dalby permalink
      October 17, 2021 8:33 pm

      Solar, wind etc. are claimed to be environmentally friendly and this is all that matters, not the actual truth, to investment companies wanting to please woke shareholders/investors.

  3. October 14, 2021 12:33 pm

    Well done those that retained a fireplace. All you need to do now is to buy some candles, to complement your coal, smokeless.

    • Coeur de Lion permalink
      October 15, 2021 5:04 pm

      And fircones! Six fircones is enough for grate ignition! Just topped my coal bunker for a couple of years. My wood pile ditto. Topped the CH tank too! Blow blow thou winter wind.

  4. Harry Passfield permalink
    October 14, 2021 12:47 pm

    Might be a rumour….but I read today that Gleneagles is to install diesel generators to supply charging points for all the EVs that the COP26 bigwigs have been granted for their use during their stay.

    • Chaswarnertoo permalink
      October 14, 2021 1:26 pm

      Yep. Only one available charge point. All those Teslas are derv fuelled.

    • richard permalink
      October 14, 2021 2:40 pm

      Global Generator Sales Market (2021 to 2026) – Increasing
      https://www.globenewswire.com › 2021/05/14 › Global…
      14 May 2021 — Dublin, May 14, 2021 (GLOBE NEWSWIRE) — The “Generator Sales Market by Type (Diesel, Gas), Application (Standby, Peak Shaving, Continuous), …

      • 1saveenergy permalink
        October 15, 2021 12:50 am

        Mine are serviced & ready to go + plenty of fuel

  5. October 14, 2021 1:21 pm

    Bought XOM (Exxon) October 2020 at $32, closed yesterday at $61. I am not sorry I “invested” in XOM. But I would like to to thank all the idiots who sold me their shares last October.

    • roger permalink
      October 14, 2021 4:27 pm

      As am I to those who sold me Shell. Candy from a baby comes to mind. Never sell shell I was told half a century ago and that remains gilt edged advice today if not more so for as long as the children and their child like governments vilify nuclear.
      Those who hedge with RR making small reactors will be twice blessed.

  6. Broadlands permalink
    October 14, 2021 1:41 pm

    It is ironic that all of the people attending this global warming conference will be using renewable biofuels to get there and travel around. Don’t they realize that biofuels are 90% fossil fuel and only 10% ethanol…being burned while they use it to put it all back in the atmosphere? How can that be part of any plan to “save the planet”?

  7. Derek Wood permalink
    October 14, 2021 2:55 pm

    When you consider that every Covid rule ever made will not apply to any of these visitors, and tack that together with the electric cars/diesel generators story, you start to wonder if this isn’t really just an attempt to set some sort of world record for wall to wall hypocrisy!

  8. October 14, 2021 2:59 pm

    “But if new investment does not come forward to maintain output levels, energy markets will become tighter still, driving up prices to crisis levels.
    The knock on effect this will have on the world’s economy could be frightening.”

    Don’t worry! Our competent government led by the supreme leader Boris has it all under control. They have shown how good they are at planning for crises.

    • Graeme No.3 permalink
      October 14, 2021 9:33 pm

      Likewise China, the home of Central Planning, where they have released millions of tons of Australian black coal from embargo and have ordered their own coal mines to maximise output. Also buying (lower grade, hence dirtier) coal from Asia (Kazarkstan).

      In old ozzie parlance, I don’t think your supreme leader could find his way out of a paper bag.

      • T Walker permalink
        October 15, 2021 11:00 pm

        Sadly – only too true Graeme

  9. Penda100 permalink
    October 14, 2021 3:51 pm

    And from today’s Telegraph “THE US is ramping up its use of coal to generate electricity as high global gas prices deal a blow to Joe Biden’s ambitions to eliminate carbon emissions from America’s power grid.” So instead of burning clean gas, the US is going to burn “dirty” coal, just like China. I suppose keeping the lights on always takes precedent over saving the planet.

    • Duker permalink
      October 16, 2021 7:15 am

      Everybody is using more coal this year…’its higher than expected’

      It will a while yet before we get to ‘peak coal’

    • Martin Brumby permalink
      October 16, 2021 9:59 am

      Of course, the other country burning “dirty” coal is Germany. They have ony recently opened absolutely enormous lignite mines and lignite is about as dirty as it gets.

      Shitty Kazakh or Mongolian coal is like best Welsh Anthracite in comparison.

      But obviously, when you fell ancient forests for whirligig subsidy farms and shutter nuclear power stations in Bavaria for fear of tsunamis, you are virtue-signalling their GangGreen credentials.

      Boris must be jealous.

  10. October 15, 2021 12:17 am

    I have a friend who makes it a point to hold the USFS, the Forest Service, accountable. He and fellow activists sue them whenever they break the law. Most often, he and friends win. Of course they need brains and resources. But I have to ask here, as NOAA has engaged in illegal activity, perhaps criminal, if there is any device, like a lawsuit, to hold them accountable?

    I know, with these climate change freaks, that they are all impermeable to damage, protected in a web of deceit. But just the chance to call them to defend themselves, not on MSNBC, but rather in a court of law, might be a treat.

    The problem is that we on the receiving end of their propaganda are not organized. They, who hold the deck, stack it and deal it, are a well-formed group of psychopaths.

  11. Gamecock permalink
    October 16, 2021 11:40 am

    Et tu WSJ?

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