Climate change fears are making millions for energy investors
Another example of the law of unintended consequences
Anyone who has taken a glance at a heating bill this winter understands the stupidity of Canada’s Liberal Government’s climate policies, seen in the context of similarly stupid policies in America and Europe. The consequence of a drive to lower CO2 emissions (which are harmless) has been less capital invested in fossil fuels causing a world wide shortage. The tight markets are making headlines.
Nonsensical policies targeting “climate change” have parallels in the inane policies to deal with COVID - lockdowns damaging the economy; school closures harming our children’s education; massive increases in federal debt arising from unrestrained spending to “have our backs”; and, vaccine mandates encouraging “fully vaccinated” people to assemble despite clear evidence they can both carry and transmit the disease in spite of their vaccinations.
The unintended consequences are dire for most people and a boon for energy investors. For most people, the sharp rise in inflation arising from these foolish policies comprises a tax on those least able to afford it. Canada’s inflation rate is at a 30 year high. For energy investors, the artificially created “shortages” caused by Biden’s policies in the United States; Trudeau’s in Canada; and, Johnson’s in the United Kingdom have seen dramatic increases in oil & gas prices and a gusher of cash for energy producers who are choosing to buy back stock and increase dividends rather than increase output.
In the United Kingdom, which has pretty well abandoned fossil fuels in favour of wind generated electricity, the price of natural gas is now eight times the price we pay in Canada and the Canadian prices is about triple what it was a year ago. The wholesale price of natural gas - used to heat 85% of homes in the United Kingdom) is now running at about 350 pence per therm. One therm is 100 cubic feet and and 100 pence is $1.76 Canadian. For those used to seeing prices in dollars per thousand cubic feet, the U.K. wholesale natural gas price is 3.5 x 10 x $1.76 = $61.60 per Mcf. That is the equivalent of $375 per Barrel of Oil Equivalent (based on a ratio of 6.1 Mcf per barrel of oil, the industry standard conversion). The Canadian price today is about $4.00 per Mcf. Well done Boris Johnson.
That pricing has seen the trading price of Peyto Exploration & Development (PEY.TO) run from $3.17 on January 1, 2021 to $9.71 today, a gain of 289%. I purchased Peyto shares on March 13, 2020 for $1.14 a share. I hold a portoflio of oil & gas stocks accumulated during the Trudeau “climate change” campaign and those investments have turned out well. My 2021 results were published in an earlier article and ranged from 120% to 184% across the three portfolios mentioned in that article.
We see a lot of oxygen given to investment managers for Canadian banks and pension funds who promote so-called ESG investing and, despite their fiduciary duties to their beneficiaries, have declared an end to their investments in fossil fuels and promoted the idea that ESG investing will produce superior returns. Nonsense. None of them have produced returns that match even a fraction of those I have earned by investing in energy names. I have published an article regarding the frailty of the ESG fad and how investors who succumb to the rhetoric will suffer poor outcomes.
The Caisse de Depot et Placement is one of Canada’s largest pension funds and has publicly declared it will divest its energy investments in fossil fuels. That fund reported investment returns of 7.7% for 2020 and 5.6% for the first 6 months of 2021. That is a disgrace and those fund managers should get other jobs. The broad U.S. indexes all finished 2021 with annual returns from 15% to 29% and the energy sector gained over 55% for the year.
2022 should be another good year for energy investors. Biden squandered energy independence; Europe is desperately seeking more Liquified Natural Gas imports from America; and, political squabbling over Russian gas supplies and pipelines is constraining alternatives for Europe to stay warm this winter. If the winter is a cold one, millions of people will suffer from energy poverty as they struggle to pay for home heating and are forced to choose between energy and food.
But for oil & gas investors, the outlook could hardly be brighter. I am thankful for the stupidity of Liberal voters in Canada who elected a lightweight Prime Minister who confuses what works with what sounds good and whose inept leadership has driven housing costs through the roof, led to runaway inflation, and made my life a lot more profitable. I may even vote Liberal next election since my real estate, mining and oil & gas investments benefit from inflation and supply shortages and if we re-elect Trudeau we can keep this party going until our economy collapses.
I won’t even mind paying the useless carbon tax on my new gas guzzling Mercedes sedan given Trudeau policies have paid for the vehicle and given me more than enough money to cover all the taxes he can dream up.