Leftist attacks on fossil fuels are causing a brain drain from the oil patch

Fewer petroleum engineers portends higher energy costs

The number of university students graduating with degrees in petroleum engineering has fallen sharply in the past decade, from 1,799 in 2014 to 679 this year. Oil & gas companies need petroleum engineers to plan their drilling and equip and tie in the wells and transmission pipeline infrastructure. The decline in graduates is in part a manifestation of the attack on fossil fuels by leftists spouting the nonsense that CO2 causes climate change and the high penetration of socialist and marxists into university faculties.

The situation will worsen. Undergraduates enrolling in the petroleum engineering discipline peaked in 2014 and have fallen away ever since. For the previous two decades, enrollment in petroleum engineering tracked the world price of oil, but has since decoupled.

Climate alarmists are cheering the trend today, but that cheer will turn to despair as the global shortage of energy becomes acute in the next few years. The relentless attack on the oil & gas industry by climate activists has seen capital abandon the space along with the flight of talent. The result, coupled with the natural decline of output from currently producing oil & gas reservoirs, will be a severe shortage of fossil fuels in the near future.

The world gets 80% of its energy from coal, oil and gas. Attempts to displace oil have seen virtually no abatement in demand for the black gold despite trillions of dollars squandered on so-called “renewables” - wind and solar - which despite the trillions of capital continue to comprise a tiny fraction of world energy supply and a costly and unreliable supply at that. Wind and solar in 2022 made up 10% of world electricity production, but total energy consumption includes a lot more than electricity.

The headlines today are rife with claims that Earth is boiling and blaming that on CO2 emissions. It is hard to imagine a more widespread case of hysteria devoid of merit. I wonder how Virginians react to the propaganda in the face of the reality that the number of days with daily high temperatures over 100 degrees F has declined since the 1930’s a remains below the level of the early 1900’s despite the rise in atmospheric CO2 levels in the period? Probably they are alarmed and vote Democrat since you can be certain no one in the Biden administration and certainly not climate Czar John Kerry will do anything to disabuse them of the myth the left keeps promoting.

Joe Biden tried to keep oil prices down by robbing the Strategic Petroleum Reserve of almost 200 million barrels of oil, an effort to hide a potential shortage that fueled inflation on reduced his re-election chances. That hasn’t worked well for America or for Biden. Today about half of Democrats don’t want him to run, his approval ratings are in the basement, and oil prices stubbornly remain high. Sure, dumping oil from the SPR on the market created some short term relief but oil prices are still four times the low of 2020 and heading higher.

Those rising prices will manifest themselves into higher inflation prints over the coming months and the hopes for a “soft landing” from inflation will fade into obscurity as the combination of higher borrowing costs, higher energy costs, higher food costs and higher rents impact household budgets and impel organized labor to strike for higher wages. A classic wage-price squeeze is at hand in some industries already, with auto-maker Stellantis seeing the UAW toss its proposed collective bargaining agreement into the trash bin only this week. The Big 3 automakers are in for a tough round of negotiations. The emboldened UAW is demanding that new battery plants become unionized by the UAW in addition to substantial increases in wages, benefits and health care coverage. Legacy automakers like GM and Ford are shipping thousands of dollars of losses on the hood of every EV and the demand will result in acrimony and contentious discussions where the likely outcome will see the UAW prevail and costs rise.

The outlook for the oil & gas industry is positive for investors and negative for socialist politicians. Prices will rise and cash flows will find their way into dividends and stock repurchases rather than into higher drilling activity, and supply will not keep up with demand (except for some possible short term respite if the much awaited recession ever materializes). I remain bullish on the outlook for oil & gas companies with clean balance sheets and low costs, and in particular like Birchcliff (BIR.TO), Peyto (PEY.TO), Bonterra (BNE.TO), Baytex (BTE) and Canadian Natural Resources (CNQ). On the U.S. side I see potential for Chesapeake (CHK) but avoid most U.S. producers owing to the mercurial and toxic environment created by the Biden administration (not that Trudeau is any better here in Canada, but the Provinces have more to say about royalties than Ottawa).