Doug Sheridan concludes…
“The WSJ Editorial Board writes, the climate lobby’s pronouncements that the end of fossil fuels is nigh appear as premature as warnings two decades ago that supply would soon run out.“
Doug Sheridan concludes…
The WSJ Editorial Board writes, the climate lobby’s pronouncements that the end of fossil fuels is nigh appear as premature as warnings two decades ago that supply would soon run out. Now, Chevron has announced a $53B bid for Hess Corporation because it knows the world will need oil and gas for the foreseeable future no matter how much politicians subsidize green energy.
Chevron’s Hess acquisition comes on the heels of ExxonMobil $60B tie-up with Pioneer Natural Resources Company. Higher interest rates are prompting consolidation across the US economy, as smaller, less-capitalized companies struggle to borrow. Oil and gas giants are flush with cash owing to the run-up in prices over the past two years.
The deal is a tell in the direction of the industry. If Chevron believed demand for hydrocarbons would soon peak and decline it instead could have boosted investment in heavily subsidized green-energy ventures such as hydrogen or increased shareholder buybacks. But oil and gas are yielding a higher ROI than renewables, even with govt’s enormous green subsidies. This is why BP and Shell are scaling back wind and solar investment and sinking more capital into fossil fuels.
Chevron CEO Mike Wirth says the company will make a double-digit return on capital. Offshore wind projects around the world are being scrapped because they aren’t expected to be profitable amid higher interest rates and material costs. Ford and GM are putting their EV manufacturing plans in neutral amid slowing consumer demand. Tesla also recently dialed back plans to expand.
Demand for green energy and EVs could peak sooner than demand for fossil fuels. Population and energy demand are growing mostly in low-income countries. Nigerians aren’t going to drive Teslas or power their homes with solar panels. High costs and technological challenges also limit the widespread deployment of green energy and EVs in wealthy countries.
To Sum It Up: The climate lobby still isn’t paying attention. The International Energy Agency (IEA) last month proclaimed that the world is witnessing “the beginning of the end of the fossil fuel era.” Green activists are demanding that companies disclose their “climate risks.” The real threat to a more prosperous future, as Chevron well knows, is a world with too little oil and gas, not too much.
Our Take: The global energy sector can't replace oil and gas with renewables and other green alternatives any more than the health care sector could to replace antibiotics, insulin and other lifesaving pharmaceuticals with vitamin supplements, herbals application, and acupuncture. Chevron’s Mike Wirth understands this better than most. He remains the industry's most effective proponent and spokesperson.