Big oil has once again gone into the confessional – and while oil industry execs have hinted at diminishing available supplies in the past, when prices were high, their recent admission that we’re running out of cheap oil is surprising now that prices have slid back down to three year lows.
This recent juicy piece of news (we’ll get more into it in a bit), coupled with Obama’s nomination of several energy-savvy cabinet members and the recent World Energy Outlook released by the International Energy Agency indicates that renewable energy is about to come on the scene in a big way.
With nearly all sectors of the market battered in the aftermath of a housing crash and resultant credit crisis, the coming onslaught of favorable policy conditions for alternative energy will allow investors to reap nice profits for several years.
Exciting as that may be, the reasons behind the unavoidable ascent of renewable energy–many of which are making headlines right now–are equally provocative.
Bye Bye Black Stuff
That’s what major oil industry executives had to say in a study conducted by Deloitte LLP, the results of which were released last week. In a come-to-Jesus, slam the confessional door moment, 53% of the 52 oil execs surveyed said the U.S. could run out of cheap oil in the next 25 years. Even better, 77% of oil insiders don’t think oil and gas will be the cheapest energy source in the next 25 years, as they are now.
We need to pause to absorb the gravity of this moment.
The leaders of organizations that have fought global warming and peak oil science tooth and nail, and that have funded dozens of studies to prove those theories false, all the while stymying growth in the renewables’ field, have pretty much said outright that their business is in terminal decline. Of course, their recent admissions are only a function of reality, with a little bit of greed tossed in.
Many of the world’s largest oil fields, like Ghawar and Cantarell, have recently been proven to be dying off. Some are depleting at rates as high as 15% per year. The unconventional sources, despite being egregiously dirty, are also extremely expensive to produce. They were risky ventures with oil trading higher than $100, but they’re certainly not profitable in today’s market.
Plus, the oil companies know how much government spending is about to flow to renewables, especially with Obama’s energy policy. You can bet they want some of that cheese to be grated over their companies.
It’s no wonder that in the Deloitte study more than half of the executives felt that petroleum companies should work toward helping America transition to the use of more renewables and other alternative fuels, with 75% claiming that the U.S. can realistically achieve energy independence. That’s a trillion dollar transition. They’re simply angling for their share of it.
Surely you won’t think it’s coincidence, then, that the same week the study was released, Exxon, the world’s largest publicly traded oil company, expanded its energy outlook to include a new section on the development of all “viable” forms of energy and public policy on climate risk.
Your portfolio should be reflecting some of those changes as well.
Follow the Money, Follow the Leaders
In its World Energy Outlook last month, the International Energy Agency stated that $26 trillion in investment is required by 2030 for there to be enough energy supply to meet surging demand.
The agency recommends another $9.2 trillion be invested in order to meet the widely held goal of keeping atmospheric CO2 levels below 450 parts per million.
That caliber of investment will certainly find its way onto the balance sheets of renewable energy and infrastructure companies as an alternative energy economy is established and realized.
Remember, we’re talking about trillions of dollars over just 20 or so years.
That means billions for wind. Billions for solar. Billions for wave. Billions for smart grid. Billions for electric vehicles. Billions for infrastructure. And billions for carbon management.
It’ll be one of the longest prolonged bull markets ever witnessed. And it’ll be authorized by hundreds of governments around the world, the World Bank, the UN, and nearly any other overseeing global body you can think of.
Most importantly, it’ll be authorized by you: the taxpayer and individual investor.
Indeed, some of your tax dollars will inevitably be used to fund some of these projects.
But, if you invest in renewable energy on the back end, in the public market, you can reap dividends that could make taxes look like a petty burden.
And, even though there are plenty to be had, investing in renewable energy isn’t only for pure profits. It’s a double bottom line investment that boosts your portfolio and the companies that are ushering in a new energy future. Do your research now. Begin seeking out investments that are tied to renewable energy and infrastructure improvements. Because substantial changes are about to occur in the way we see and use energy.
A lot of work needs to be done. But a lot of money stands to be made.