Oil And Mining Companies Are Not Upping Their Capital Expenditure Game
It may have been a monstrous error to begin the stranded-asset talk a decade ago, with its implied regulatory fiats, before we knew what our path forward was going to be.
The outro from a January 2022 (i.e. before Russia - Ukraine) post:
...ESG is currently over-owned, oil & gas under-owned in light of
the fact that 10 years of "stranded asset" talk (yes, it's been a
decade). From the intro to a 2016 piece*:
Since 2012 when the Carbon Tracker Initiative came up with the idea as a
pitch to keep hydrocarbons in the ground we've been kicking around
in-house what, if any, effects the the carbon bubble/stranded assets
arguments will have on price, and to this day don't have a clear-cut
answer for patient reader.
[that was in 2016] Well, six years later we
have a bit more clarity, oil companies have been putting money in
shareholder's hands rather than in the ground, nothing dramatic, on a
year to year basis but on a decadal scale it's hundreds of
billions/trillions that didn't go into exploration....
Here's the latest from Mining.com, May 31
CHART: Big oil, mining on capex strike
Capital expenditure by large oil and mining companies is down to a
15-year low despite a 40% rise in global commodity consumption over the
same period, according to a new report.
Investment firm GMO in its quarterly publication
takes a look at how investors can protect themselves from inflation by
investing in natural resource stocks, which, according to the report,
remain fundamentally undervalued.
Lucas White, portfolio manager for Resources and Climate Change
Strategies at the Boston-based company, says it is “somewhat stunning”
that despite the fact that the world consumes around 40% more of many
major commodities like natural gas, iron ore and copper than it did 15
years ago, resource companies have slashed investment in new production.
White points out that the Bloomberg commodity index is up 500% since
2000, adding that “it’s hard to imagine any plausible explanation for
such a dramatic surge in commodity prices that doesn’t include a healthy
dose of scarcity”....
We've been following the proponents of the Carbon Bubble argument since
the term was first floated by the Carbon Tracker Initiative in March
2012.
Al Gore tried to frame it as analogous to the sub-prime bubble but no
one is really listening to him. Mr. Grantham via his Grantham Research
Institute is going with the unburnable carbon/stranded assets approach
and is probably the most prestigious voice making the argument followed
in rapidly descending order by Nick Lord Stern who Chairs the GRI; billionaire political activist Tom Steyer who is making full use of Citizens United
and who recently hooked up with Michael Bloomberg (just named the U.N's
climate change/cities envoy) and former Goldman honcho (and less
powerfully, U.S. Treasury Secretary) Hank Paulson in their Risky
Business initiative.
A related movement is divestment from fossil fuel producers by some
public employee pension funds and demonstrations for same from college
endowments. In the most famous instance Harvard said no.
The thesis hangs on the 2°C target that the EU adopted as their goal for maximum global warming. I should probably do a post on that one of these days.
I hope I've left enough breadcrumbs for our journalist
friends to, should they wish to, write the book (or at least this
chapter) on the global warming story.....
....She pretty much lays it all out right there. As with European carbon, it
appears that we have an upwardly moving market price created by rules
and regs. If the above doesn't communicate what has been decided let's
try....
Earlier we saw Warren Buffet upping his stake in Chevron as well as adding Occidental Petroleum to Berkshire's portfolio and now this. Buy hydrocarbons, number go up....
