Following on from my previous post on COP26 you have to ask if there has been any move away from fossil fuels and what is the likelihood that there will be some reduction in their use.
Thompson Clark of Mauldin Economics made some good points on his Smart Money Monday article. Even with the investment being put into green energy stocks the performance of them compared to traditional energy stocks has been interesting to say the least – see graph below.
TAN = solar and green energy stocks – dropped 20%
XLE = traditional energy companies (Exxon, Chevron) – increased by 44%
Oil prices have risen to over $80 a barrel (see graph) which in turn has led to the US releasing 50m barrels of oil — about 2.5 days worth of US oil consumption. This comes as Saudi Arabia, Russia and other members of OPEC have rejected pleas to pump more supply into the market. Furthermore with the drilling bans in the US this summer this will only further limit the supply and therefore push up the price. For the move to a more green energy environment there needs to be more available supply of solar etc to quell the demand for fossil fuels.
Today 83% of the world’s energy supply comes from oil, gas and coal and there is no real change in consumption patterns. With supply pressures (no drilling) and demand (people coming out of lockdown) stocks in oil companies should continue to perform well.