The process of “weighing” a stock promoter’s narrative is imprecise because “reality” as reflected via stock prices can be a rapidly moving target, as “things change.” And when the value of “current operations” is zero and the stock price is 99.9% based upon the present value of the future, it can change rapidly. And when you really don’t have a baseline to consider to look for “support,” the lack of any basis of current value can feel, we would guess lonely. And painful. And seems to be happening recently.

So the topic is “anything to do with non-carbon-based energy” schemes. We ran across a piece by the investment firm of Goehring and Rozencwajg who have been pummeling the world’s ears and eyes with a pro-carbon energy/commodity position…for years. We have generally come around to the broken clock aspect of timing and think it’s generally right..now. It pays to look at economic areas which are “necessary” and being starved for capital, for the fix for poor pricing is always the death of supply. It remains in the best interest of most energy-producing countries to restrain production and it is clear here in the US that the celebration of energy independence, job creation, and pouring money into negative free cash flow in the Permian Basin is over. We would also note an ENORMOUS reticence by large groups of institutional investors to invest in the sector, as Scarlet Letter risk appears to be gripping investment committees as if a new Jeffrey Epstein autobiography was somehow found and about to be released. We have recently and gingerly invested in this space…and wish we had done more of course given its appreciation since the summer. But we think this will be an irregular move a lot higher and we will likely be committing more capital to companies who are toiling in the production of oil and gas, and not burning our money with headline-pleasing capital allocation.

Per the G+R piece, this is a baseline to consider when evaluating the promise and the valuation of “alt-energy” investments.

“The IEA’s World Energy Outlook generated a lot of attention when it was released. Upon closer inspection, we believe the report makes two critical mistakes. While [the report projects] CO2 emissions fall to 15 bn tonnes by 2040, the drivers of the reduction seem questionable. For emissions to fall 60% over the next twenty years, the IEA assumes per capita energy demand will fall by 25% while CO2 per unit of energy drops by 50%, offset by population growth of 20%. Together, these factors equate to a 60% reduction in total carbon emissions and keep atmospheric CO2 to within 450 ppm. Unfortunately, neither energy intensity nor carbon intensity are likely to fall anywhere near the amount predicted by the IEA.

“Few people are aware that most climate proposals are based on consuming 25% less energy. According to the BP statistical review, there has not been a single 20-year period since their data begins in 1965 where per capita demand has fallen by more than 0.1%, making this assumption untenable.

“We have spent years studying energy trends in emerging markets. Over that time, non-OECD countries have gone from consuming 40% of all primary energy to 60%. As an emerging market gets richer, it reaches a tipping point and starts to consume more energy. Once an economy is developed, it reaches a saturation point and energy demand moderates. Since 2000, non-OECD countries have grown their primary energy demand per capita by 65% compared with a reduction of 10% in the OECD world. Even following two decades of strong growth, non-OECD demand is still 70% below OECD levels suggesting more growth is yet to come. Non-OECD real GDP per capita is expected to double over the next 20 years, suggesting these trends will continue. Instead, the IEA projects emerging market per capita energy demand will fall by 20%. Simply put, this is impossible. Over the last two decades, real GDP doubled, and energy demand rose 60%. Even if this relationship is cut in half, the next doubling on GDP would result in energy demand growing by 30% by 2040, not falling by 20% …

“Unfortunately, carbon intensity per unit of energy consumed is unlikely to fall by the 50% assumed in the IEA’s proposal either. It is widely believed the reduction will be based upon the widespread adoption of wind, solar, electric vehicles, and hydrogen fuel cells, but our research suggests these technologies will fail to deliver the expected results. There are several real-world examples that confirm our suspicions. Over the past two decades, Germany has aggressively pursued its renewable-centric “Energiewende” plan, taking renewables from 2% of all German electricity to nearly 40%—by far the most aggressive renewable push in the world. Over the same period, carbon emissions per unit of energy fell by only 12%. Not only is this reduction a far cry from the projected 50% reduction in most energy transition plans, but it is also no better than those countries that did not adopt a renewable energy push. Between 2000 and 2019, the US and France went from 1% renewable electricity to 10% or less than one-third of Germany’s penetration. Despite this lack of renewable adoption, US carbon intensity fell by 13% while France’s intensity fell by 10%, ahead of and only slightly behind Germany, respectively.”