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Author Topic: The Big Picture of Renewable Energy Growth  (Read 23613 times)

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Re: The Big Picture of Renewable Energy Growth
« Reply #330 on: November 18, 2018, 05:51:51 pm »
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The Doom Of Fossil Fuel Investments 

November 18th, 2018 by Guest Contributor

By Nathanael Nerode



• There is a very short window of time to get out of pure-play oil & gas company investments without substantial losses. It is imperative to sell them now.

• It is already too late to get out of pure-play coal company investments without substantial losses. But they will lose even more money going forward.

• Utility companies which have a heavy reliance on fossil fuels are also in trouble.
Diversified companies will lose money on their coal, oil, and gas portfolios, although this may not be significant enough to warrant getting out of a diversified company.

• It will remain possible to do short-term swing trading in coal, oil, and gas companies with no future, but this is inappropriately risky behavior for a conservative investor.

The Reasons

Oil demand is mostly for cars & trucks and will be destroyed by electric cars & trucks.

Electricity will be primarily generated by solar and wind, as they will be cheaper than fossils.

Coal demand is mostly for electricity, is already being destroyed by natural gas, and will be further destroyed by cheap solar and wind.

Gas demand for heating will be destroyed by electric heat pumps, and for electricity by solar and wind.

The residual demand (for airplanes, steelmaking, and plastics feedstocks) will not be enough to prevent the extraction and refining companies from losing enormous amounts of money over the next couple of decades.

Utilities will do badly if they bet on fossil fuels and will do well if they invest in low-priced solar, wind, and batteries.

Full Analysis

► There are three major categories of fossil fuels: coal, oil, and gas. I will discuss oil first, with a detour to electricity, then coal, then gas, and finally a section on the fate of utilities.

► I will go through pricing calculations and comparisons to demonstrate that the alternatives to coal, oil, and gas are either already cheaper or guaranteed to be cheaper within the next 2 years for a sufficiently large percentage of consumers to cause huge drops in fossil fuel demand over the next 10 years.


The Empirical Evidence

I and my family were heavily invested in oil and gas stocks for many decades because they were highly profitable. It didn’t cost that much to punch a hole in the ground and get a Texas “gusher,” and then the oil spouted out of the ground practically for free – but everyone bought lots of oil because all the alternatives were impractical or too expensive. So, they were good investments at the time.

In 2008, I sold them all, including my personal $384,000 worth of Exxon stock.

This was a wise decision. XOM stock is now worth about what it was when I sold it at the peak in 2008. It hasn’t gained at all. True, it did issue dividends – at a dividend yield of about 3.24%. This is well below any reasonable benchmark.

The dividend is coming out of the capital of the company. Exxon paid out more in dividends than it earned in the third quarter of 2016 (earnings 63 cents per share, dividend 75 cents per share).

The other oil majors are in similar financial trouble. Chevron is recording losses. Shell and Chevron are also paying out dividends in excess of earnings. BP and Shell have introduced scrip dividend programs in order to avoid paying out dividends in cash. All of them, including BP, are borrowing large amounts of money. Upstream businesses are losing money or barely breaking even; refinery profits are dropping; only the chemicals business is stable and it’s quite small.

The majors are, of course, much more financially secure than second-tier oil companies like Anadarko and Devon, which lose money routinely.

So much for the empirical evidence that they’re bad investments. I can also explain why.

Full article:

Light is sown for the righteous, and gladness for the upright in heart. Ps. 97:11


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