Fossil Fuel Is Dead

Jun 14, 2017 by

solar panels

Soon cheaper everywhere than fossil fuel.

I’ve written many times here that I don’t give investing advice. I’m not qualified, and I don’t want to be even partly responsible for what happens to your nest egg.

But one aim of Money Counselor is to provide a forum for sharing ideas. I offer mine, and I encourage you to offer yours in the comments (or through a guest post, if you’d like). In this post I will explain my current thoughts about investing in the energy sector. I invite your critique and counter ideas in the comments.

What Drives Much of Humankind?

Think about this for a moment: What force has driven what’s commonly if dubiously called “progress” over the course of recorded history?

Religion? Certainly a contender, but not #1 in my view.

Hunger? #1 at times, but not overall.

Altruism? That’s a nice, Mother Teresa-ish thought, but get real.

My answer: humankind’s affinity for wealth, the most powerful force in recorded history.

Of course not all humans or cultures are driven by an affinity for wealth. Aboriginals inhabited North America long before Europeans invaded en masse. In general, aboriginal societies were not centered on money, capitalism, and mercantilism. They were subsistence societies, and quite happily so, I do believe. To be clear, this next sentence is meant as a very high compliment: I think North American aboriginals, if left alone, would never have invented, say, the iPhone or Facebook. They had more constructive things to do with their time than Like, Follow, Sticker, and Chat.

With that caveat aside, back to my thesis: the most powerful force in recorded history has been, and still is (even more so), humankind’s affinity for wealth. Sticking with my North American example, if not for the opportunity to exploit resources to generate wealth, Europeans would never have bothered to invade and take over what is now the U.S. and Canada. Cutting trees, skinning beasts, excavating minerals, pumping oil, and mining precious metals—that’s what made America “great.”

The Energy Sector’s Future

Okay, if you accept that humankind’s affinity for wealth is an irresistible and overwhelmingly powerful force, how do we—in our quest for wealth in the form of a nest egg big enough to secure a comfortable retirement at a time of our choosing—use that insight to guide our investments? And in particular, I want to talk about investing in the energy sector in this piece, though surely the affinity-for-wealth force should guide investments in all sectors.

Here’s my thought: Fossil fuels are dead. The Really Big Money over the next 50 years will be made in the renewables energy sector. For an investing time horizon longer than 5 years, I think one’s energy investments should be concentrated solely in renewable energy and related opportunities.

Fossil Fuel is Dead

Yeah, a lot of people are still making money pumping oil, especially in Texas and North Dakota. Heck, we own Chevron stock, because it pays a nice dividend. And oil consumption continues to rise. But that the price of oil appears permanently to be in the doldrums speaks volumes I think. The writing is on the wall.

Paris Accord? Phooey.

Regardless of what politicians do, cutting-edge, card-carrying capitalists are killing fossil fuel—to make money, not save the world. That means certain death.

A report from Bloomberg New Energy Finance shows that within as few as eight years, electric cars in Europe and North America will be cheaper to buy and run than traditional vehicles powered by internal combustion engines.

That’s a good part of the reason oil’s price is stuck and so-called Peak Oil is never going to happen.

Electric car technology development is just one example of a revolution unfolding across virtually every sector of the economy that produces or consumes energy, i.e., pretty much the entire economy.

What’s happening in solar technology development and manufacturing may be even more disruptive. A Feb 2017 Fortune article reported that U.S. solar industry jobs totaled 260,000 in 2016—a 25% jump over 2015 “largely driven by a massive increase in solar panel installations…caused by a rapid decrease in the cost of solar panels and unprecedented consumer demand.”

In my own community a solar cooperative’s business model—lease $100k+ solar installations to businesses and multi-unit residential buildings–is now a moneymaker for both co-op and customer, due chiefly to the incredible drop in solar panel cost over the past decade. The financial incentive to go solar grows practically by the month.

And the Tweeter-in-Chief’s many fantasies notwithstanding, coal can no longer compete with sustainable alternatives.

Making America Great? Not.

Investors, national economies, and electorates that cling stubbornly to increasingly obsolete, 20th-century fossil fuel development and infrastructure will be in a world of financial hurt within a decade, methinks. The future financial spoils from energy-source development will accrue to the world’s Elon Musks and those who will work for and with them. The T. Boone Pickens’s have had their day.

Tesla’s market capitalization—a good gauge of investors’ collective evaluation of a company’s prospects—already exceeds General Motors’.

I’m taking even-odds wagers that by 2030 Tesla’s revenue will exceed Ford’s. Email me if you’d like to make a bet. I’ll put a clause in my will if that’s a concern. 🙂

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  • As someone who is saving for a Tesla (follow my journey at http://roadtoatesla.blogspot.com ), I couldn’t agree more. What is even better news for the consumer is that, in most markets, electricity is a regulated utility. Price hikes need to be justified and approved before they go into effect. The days of random gas price hikes will be gone!

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