Do you have super bills? Blame the “Green Responsibility” of large investors

DB's credit strategist Jim Reid spoke on the energy crisis examined from an investment perspective, writing that " over time the surge in investments in the extractive sector between 2010-2015 will be considered the rather exception. that the norm is that, in a rapidly changing world and increasingly sensitive to ESG factors, it will be increasingly difficult to extract oil. Pricing the externalities of climate change more generally could make things more expensive over time. We are on the verge of another shift in inflation expectations due to oil and energy, one that is largely due to ESG. "

Now that the direct effects of this catastrophic policy are becoming all too evident, and nowhere more than in Europe, where gas prices have exploded to staggering levels. Extracting oil and gas in a "green" way costs much more, requires many more investments, costs much more and therefore the product costs more.

According to Bloomberg's John Authers , the basis of European gas hyperinflation lies precisely in the attempt to "decarbonise" and move from fossil fuels to renewable energy sources, " the problem is to ensure that sufficient carbon energy remains available as long as renewables they will not be able to carry the load. This did not happen “. The Europeans have been hasty, ideological and sloppy, and now we are paying the consequences.

What is worse is that while more capital flows to renewables, less capital goes to existing fossil fuel sources, which, although possibly endangered (in the next 4-5 decades) still need hundreds of billions to maintain a satisfactory level of basic production , and investors who want to "Report their commitment" like Blackrock would not want to invest anything

Putting it all together, overnight Moody's Investors Service released a report that found that oil companies need to increase investment in drilling by 54% to more than half a trillion dollars to prevent a significant supply shortfall in the coming years. Shortage of supply means skyrocketing prices, given that alternative energy sources are in hiding.

Crude oil and natural gas extractors – chastised by the unprecedented plunge in demand and prices last year, as well as the ongoing capital stigma associated with anything that isn't "green" – have not responded to the recent market rebound as usually does the industry by expanding the search for untapped fields. While international crude oil and U.S. gas have risen by more than 50% and 120% this year, respectively, drilling expenses are projected to only increase by 8% globally, Moody's analysts Sajjad Alam wrote. .

Needless to say, it's too little to replace what those companies are pumping from the ground in 2022, setting the stage for scenarios with even more scarce supplies and even more stellar prices. This would send prices skyrocketing for the European and Asian economies even more than they are now.

"The industry will have to spend a lot more, especially if demand for oil and gas continues to rise above pre-pandemic levels until 2025," Moody's analysts wrote.

And the prices go through the roof

Oil and gas companies are expected to spend $ 352 billion on drilling and related activities this year, Moody's said, citing estimates from the International Energy Agency. If they increase to $ 542 billion recommended by the credit rating company, it would be the highest worldwide since 2015. Unfortunately, many investors fear being stigmatized by the powerful green, ESG energy lobby, for which there will have to be rewards. very high to trigger new investments. But this condition is about to come true.

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The article Do you have super bills? The blame for the "green responsibility" of large investors comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/avete-bollette-super-colpa-della-responsabilita-verde-degli-grossi-investitori/ on Fri, 08 Oct 2021 06:00:29 +0000.