{"id":627,"date":"2023-10-25T12:00:08","date_gmt":"2023-10-25T12:00:08","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/?p=627"},"modified":"2025-05-15T14:52:05","modified_gmt":"2025-05-15T14:52:05","slug":"teach-investors-about-the-green-energy-transition","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/teach-investors-about-the-green-energy-transition\/","title":{"rendered":"Good News! What Moby Dick Can Teach Investors About the Green Energy Transition"},"content":{"rendered":"<p>Year: 1846,<\/p>\n<p>Location: Atlantic Ocean off of the coast of Nantucket<\/p>\n<p><em>The harpooner stood in the prow &#8211; balanced despite the swells &#8211; with a shout, he launched the spear. Panicked and in pain the whale bellowed and dove. Chaos erupted in the boat as the line tightened; yanking the boat forward in a surge of foam and spray. Men clung to the sides, adrenaline high, as they were towed through choppy waves by the desperate animal, their lives hanging by a taut, blood-streaked rope.<\/em><\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-full wp-image-632\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/moby-dick.jpg\" alt=\"Moby Dick\" width=\"800\" height=\"802\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/moby-dick.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/moby-dick-300x300.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/moby-dick-150x150.jpg 150w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/moby-dick-768x770.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>Hermann Melville&#8217;s <em>Moby Dick <\/em>which was published in\u00a01851 &#8211; five years after the peak of the US Whaling Industry and eight years before the first oil well in America was drilled &#8211; immortalized the whaling industry.\u00a0 Can you believe that whale oil lubricated some of the fine machines of the industrial revolution for a century before petroleum products replaced it?\u00a0 Mind Blowing.<\/p>\n<h2><span style=\"font-size: 14pt\">A Bath of Black Gold<\/span><\/h2>\n<p>The world changed on August 29, 1859 when Edwin Drake&#8217;s steam-powered drill struck oil at just 69.5 feet in Titusville, Pennsylvania.\u00a0 \u00a0Drake&#8217;s discovery would soon end the profits (and horror) of the whaling industry and change the course of civilization.\u00a0 The era of cheap and abundant energy began as the bathtub Drake had placed beside the well began to fill with black gold.\u00a0 This inflection point in history can be seen in the charts below.\u00a0 For millennia, human\u00a0kind\u00a0was stuck in scarcity &#8211; energy abundance unlocked all that we now call civilization.<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-full wp-image-633\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/global-primary-energy-consumption.jpg\" alt=\"global primary energy consumption\" width=\"800\" height=\"542\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/global-primary-energy-consumption.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/global-primary-energy-consumption-300x203.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/global-primary-energy-consumption-768x520.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>source:\u00a0<a href=\"https:\/\/ourworldindata.org\/global-energy-200-years\">https:\/\/ourworldindata.org\/global-energy-200-years<\/a><\/p>\n<p><img decoding=\"async\" class=\"alignnone size-full wp-image-634\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/world-gdp.jpg\" alt=\"world gdp\" width=\"800\" height=\"514\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/world-gdp.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/world-gdp-300x193.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/world-gdp-768x493.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>source:\u00a0<a href=\"https:\/\/ourworldindata.org\/economic-growth\">https:\/\/ourworldindata.org\/economic-growth<\/a><\/p>\n<h2><span style=\"font-size: 14pt\">Energy: The Engine of Civilization<\/span><\/h2>\n<p>Energy is life &#8211; the correlation of Global GDP (chart above) and Global Energy Consumption (top chart) is uncanny.\u00a0 What unlocked the amazing abundance we have seen since the 19th\u00a0century has been fossil fuels.\u00a0 Abundant, cheap energy is considered fundamental to all human thriving. That truth has incentivized us to transition from less dense to more dense energy sources throughout history.\u00a0 Whale oil was replaced with Petroleum.\u00a0 Wood was replaced\u00a0by coal.\u00a0 Animals were replaced with steam engines and nuclear offered an off-ramp from petroleum that society chose not to take.<\/p>\n<h2><span style=\"font-size: 14pt\">The Promise and Problem of Green Energy<\/span><\/h2>\n<p>In recent years, the Green Energy transition has been forecast to replace fossil fuels. If successful, this would represent the first time in history that energy has transitioned from a more dense to a less dense energy source.\u00a0 With western governments backing, OffShore Wind Farms will now dot the horizon of Nantucket where the sails of Whaler ships once billowed.<\/p>\n<p>You might expect that investors in Wind and Solar would be harvesting fat premiums as governments have been subsidizing the construction of new renewable energy sources &#8211; not so much actually.\u00a0 After a spectacular run-up in price in 2020, Solar, Wind and Green Energy ETFs have cratered (down -40% to -60%), while traditional energy and Uranium have skyrocketed (+150% to +220%).\u00a0 Strange, right?<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-630\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/uranium.jpg\" alt=\"\" width=\"800\" height=\"332\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/uranium.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/uranium-300x125.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/uranium-768x319.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>source: YCharts.com<\/p>\n<p>I read a lot about the energy transition, one of the better sources is the International Energy Agency, IEA. They recently updated their World Energy Update.\u00a0 I found this chart reading through the report.\u00a0 While we environmentalists will cheer the drop in coal, notice that Natural Gas and Oil only modestly decline?<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-629\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/fossil-fuel-consumption.jpg\" alt=\"fossil fuel consumption\" width=\"800\" height=\"502\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/fossil-fuel-consumption.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/fossil-fuel-consumption-300x188.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/fossil-fuel-consumption-768x482.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>source:\u00a0<a href=\"https:\/\/iea.blob.core.windows.net\/assets\/26ca51d0-4a42-4649-a7c0-552d75ddf9b2\/WorldEnergyOutlook2023.pdf\">https:\/\/iea.blob.core.windows.net\/assets\/26ca51d0-4a42-4649-a7c0-552d75ddf9b2\/WorldEnergyOutlook2023.pdf<\/a><\/p>\n<h2><span style=\"font-size: 14pt\">Fossil Fuels: Still In the Driver\u2019s Seat<\/span><\/h2>\n<p>The report proudly claims that fossil fuel use will peak in 2030, but it sure doesn&#8217;t look like it is dropping much after that.\u00a0 As you might expect, Big Oil CEOs have repeatedly questioned the forecasts of the IEA.\u00a0 Recently, both ExxonMobil and Chevron put their money where their\u00a0mouth was by announcing massive acquisitions.\u00a0 As an investor, you might be wondering, if oil and gas stocks are a good\u00a0enough investment for ExxonMobil and Chevron &#8211; why not for me?\u00a0 Based on the recent performance, and the expected usage through 2050, their businesses look pretty good:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-628\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/oil-and-gas-stocks.jpg\" alt=\"oil and gas stocks\" width=\"800\" height=\"359\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/oil-and-gas-stocks.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/oil-and-gas-stocks-300x135.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/oil-and-gas-stocks-768x345.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>source: YCharts.com<\/p>\n<h2><span style=\"font-size: 14pt\">What\u2019s Dragging Down Green Energy?<\/span><\/h2>\n<p>This still doesn&#8217;t answer the question why are Wind and Solar stocks\u00a0 underperforming?\u00a0 Higher costs and early failures (and, ironically, dozens of dead whales) have called into question the feasibility of offshore wind projects &#8211; <a href=\"https:\/\/www.cnn.com\/2023\/07\/21\/us\/offshore-wind-delays-inflation-whales-climate\/index.html#:~:text=Offshore%20wind%20construction%20requires%20a,get%20that%20supply%20chain%20going\">source<\/a>. The largest wind turbine manufacturers including Vestas, Siemens and GE have all suffered losses, failures and cost overruns which threaten to imperil the green transition the IEA is banking on. We are seeing so much backtracking of European\u00a0countries on their Green Energy aspirations that a term has been invented to describe it &#8211; &#8220;Greenlash&#8221;.\u00a0\u00a0<a href=\"https:\/\/www.reuters.com\/sustainability\/greenlash-fuels-fears-europes-environmental-ambitions-2023-08-10\/\">https:\/\/www.reuters.com\/sustainability\/greenlash-fuels-fears-europes-environmental-ambitions-2023-08-10\/<\/a>\u00a0Major automotive makers like Ford and GM have recently recanted on their EV sales goals. Solar stocks too have been struggling despite the support of the Inflation Reduction Act.\u00a0 What should investors do?<\/p>\n<h2><span style=\"font-size: 14pt\">Facing Reality as Investors<\/span><\/h2>\n<p>We might not be happy with this development, but as investors our first job is to face the world as it is rather than as we might hope it is.\u00a0 Since you pay me to manage and grow your money, that means being invested in energy &#8211; including fossil fuels.\u00a0 The day may come when I&#8217;ll need to pivot and add to the Green Energy names that are down (indeed, given how far some of these names have fallen, I imagine that day may be soon).<\/p>\n<p>Investors need to be careful to avoid Ahab&#8217;s error.\u00a0 Remember Captain Ahab? In Melville&#8217;s story Captain\u00a0Ahab was obsessed with the white whale &#8211; pursuing him at any cost.\u00a0 Eventually, Ahab harpooned Moby Dick, only to become entangled in the rope and dragged down into the abyss.\u00a0 Legislators, playing with taxpayers funds, have more than a bit of Ahab in them.\u00a0 Like Ahab they seem determined to pursue their climate agenda at any cost.\u00a0 Investors with skin in the game &#8211; their own limited capital &#8211; need to be more careful.\u00a0 We need to make sure we&#8217;re not chasing the White Whale.<\/p>\n<p>&nbsp;<\/p>\n<p>Glen<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Hermann Melville&#8217;s Moby Dick which was published in\u00a01851 &#8211; five years after the peak of the US Whaling Industry and eight years before the first oil well in America was drilled &#8211; immortalized the whaling industry.\u00a0 Can you believe that whale oil lubricated some of the fine machines of the industrial revolution for a century before petroleum products replaced it?\u00a0 Mind Blowing.<\/p>\n","protected":false},"author":193,"featured_media":632,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","footnotes":""},"categories":[93],"tags":[396,404,20],"class_list":["post-627","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights-news","tag-energy-resources","tag-government-policy-economic-impact","tag-wealth-management"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Green Energy Transition - Evans Family Wealth<\/title>\n<meta name=\"description\" content=\"Green energy stocks are sinking\u2014why? 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