As an independent energy voice, I have no corporate editors or lawyers or hand-tailored silver haired senior management muting commentary. It is often fun, being able to say what many are thinking in a direct and unfiltered way.
And yet, even with that freedom, I am at a loss to describe the mayhem going on in the energy world. It’s not that I’m afraid of stepping on toes, it’s just that the macro scene is so ludicrous that it defies description or common sense. And the world’s governors and media are terrified to say so, because they are now held hostage by the climate cartel.
Think I’m nuts? Hear me out. It won’t take long.
At present, Europe, China and India are in a mad scramble to secure hydrocarbon supplies before winter. Natural gas and coal prices are at record highs, and oil is at a 3 year high. Spot LNG cargoes are subject to bidding wars. More than half of India’s coal fired power plants have less than 3 days’ supply, when their government recommends having at least two weeks.
And winter is looming. The problem could be catastrophic.
At the same time, observe what is happening in capital/debt markets. For purpose of this discussion, two points are of note. First is that the ‘divest fossil fuels’ movement is remaining strong. Institutions around the world proudly jump on the bandwagon; fund managers race to set up green funds and turn their backs on anything to do with hydrocarbons. Pipeline projects are being shelved because builders simply don’t want to face the headache (see Penn East gas pipeline for an example).
At the very same time, according to an article in the Financial Times, companies have tapped debt and equity markets with a vengeance in 2021. Global share shales topped $1 trillion, and almost $4 trillion of bonds have been issued. Those tackling equity markets include big retailers, EV manufacturers, banks, telecom companies, etc. – a veritable who’s who of industrial giants.
Yet the world is running short of the very fuels they all require to function. Global supply chains are in tatters, and will get much worse very soon, if hydrocarbon prices continue to rise.
In the bigger picture, it adds up to this – the very fuel the world is short of, that it is desperate to acquire, that it requires for survival within months – producers cannot access capital markets, while all the users of that fuel tap debt and equity markets to fuel further growth, which will require more hydrocarbons.
Global governments are standing by, pretending there is minimal “transitory” inflation, pretending that the trillions going into green energy are doing anything at all, and sweating profusely at the thought of this all unravelling. Central banks have no clue what they are doing, as evidenced by their openly silly talk about being ahead of the inflation problem.
Within a few months, the “divest fossil fuels” campaign is going to look like the dumbest movement in history.