A recent theme in the markets has been that of inflation and increasing energy prices. This has been due to several confluencing factors:
- Transition to green energy / ESG
- The war in Ukraine
- Increase geo-political tensions, and high risks at sea
- Countries like Saudi Arabia not have as much capacity as once thought
However, in a recent talk on Thoughtful Money, Doomberg laid out the argument that there is abundant oil still remaining, and technology has allowed the use of Natural Gas Liquids (not to be confused with liquified natural gas) to be used in place of crude oil as an input to refineries. They also believe that as public discontent grows for higher prices and/or slow economic growth, pressure will grow to extract more fossil fuels, in spite of carbon emissions and ESG mandates.
This is of note, because Doomberg’s Peak Cheap Oil Is A Myth article comes only two years after they themselves posted an article entitled There’s Not Enough Oil, so it is a stark change to their previous line of thinking and the economic “doom” that they are sometimes known for expounding.
Ultimately this could please a headwind to several consensus trades such as:
- Uranium – slowing the move to nuclear if fossil fuel base loads remain cheap.
- Energy stocks – lowering profits if oil prices do not increase
- Value over growth – if inflation/interest rates remain low tech and long-duration growth stocks may remain desirable