Dear Santa, All I Want for Christmas Is…

Bonus: Super-Spiked holiday gift guide and energy & climate content recommendations

Dec 23, 2021

Dear Santa,

Credible news sources indicate you’ve updated the naughty and nice criteria. I’ve gotten my two COVID shots plus booster...I’ve been good! My Christmas wish list is pretty modest:

For oil and gas managements to continue to emphasize improving full cycle returns on capital employed, free cash flow, and balance sheet improvement over any other metric. The investment community cannot resist profitable companies; they will return if managements give them good reason. More ROCE Deep Dive posts to come on this topic in Super-Spiked in 2022.
For global elites to recognize that the world will never solve climate until we first, or simultaneously, end energy poverty. We all know climate stats and goals: <2 degrees warming and preferably 1.5 degrees by achieving net zero CO2 by 2050. What are the corresponding energy poverty reduction stats? 750 million or is it 1 billion people without any modern energy? A few billion more that are generally energy poor? 2+ billion more people joining Earth by 2100? By what year are we looking to end energy poverty? 2049? I am in favor of this and I don’t know the stats as well as I should. Given my own need for self-education, more to come in Super-Spiked in 2022. On a related note, Santa, please don’t let the US ever follow in the path of Europe when it comes to energy & climate policy.
For ESG investors, especially those in the USA and Europe, to recognize that ensuring the world has adequate, affordable, available, secure energy supply is as critical as any other objective. ESG 2.0 should be a thing. More to come on this topic in Super-Spiked in 2022.
For oil & gas managements to take steps to get natural gas in particular to a “zero methane” ambition. From a climate standpoint, this is their responsibility, it is an achievable ambition, and, I suspect will be returns-positive in aggregate. Is there any reason for “routine” (definition matters) flaring to continue? Why wait until 2030? Why not much sooner? Venting and other leaks are increasingly a manageable problem. Industry needs to figure out a way to get to reasonable self- or external regulation in 2022. And as an industry. Individual company promises, while welcomed, won’t solve the issue.
For global elites to recognize that virtue signaling divestment initiatives are short-sighted. Divestment has logic if traditional oil & gas companies don’t improve ROCE and dividends—totally get no one wants to invest in not-for-profit publicly-traded corporations. But attempting to starve energy suppliers of capital at a time energy poverty still exists in a major way can’t possibly be the correct path for the world to take. An energy secure world is a world with increased life expectancy, increased quality of living, and an ability to better adapt to our natural surroundings.
For ESG investors to really think through what it means for an oil & gas company to have a Scope 3 reduction target. Net zero Scope 1 and 2? Yes, absolutely, by 2050 or whenever the world deems a reasonable year. But in my humble opinion, Scope 3 is a societal cop out. In the absence of citizens and governments taking measures to curb crude oil demand by, for example, banning or not purchasing SUVs or instituting a gas guzzler tax, instead global elites have concocted “Scope 3” coupled with a mainstream media campaign to paint oil companies with a new tobacco brush. Please, please, please Santa don’t aid and abet this lunacy. It’s bad for humanity and it’s especially bad for the world’s least advantaged. This cannot possibly be consistent with the intentions of ESG. (To be clear, it is completely reasonable for oil companies to voluntarily pursue initiatives like hydrogen, CCUS, DAC, or renewable fuels that have the effect of helping society de-carbonize; but as a mandated target? No way that makes sense.)

Actually Santa, on second thought, this list seems rather long, not sure if its a bit preachy, and I seem to be over-committing myself with the unnecessary “more to come in 2022” tagline. Sorry about that.

Let me simplify. I just want one thing for 2022: more capitalism, less socialism.

Yours truly,

Arjun

On a personal note...

I had a quintessential middle class upbringing in New Jersey where we had a neighborhood Christmas party each year—always a highlight of the holiday season in the late 1970s and 1980s. Each year, one of the Dads, who lets just say had the body type that matched the classic image, dressed up in a Santa suit to give presents to the younger kids. Santa in real life was Jewish and therefore, like our family, not Christian. He was a cancer doctor. But we all loved those gatherings; it was a true holiday celebration of neighbors and friends that we all called Christmas. A few years ago I found out that the Santa Claus of my youth had sadly passed away. This post is dedicated to his memory.

Disclaimer

Pretty sure a “Dear Santa” and Super-Spiked holiday gift guide post does not require an elaborate disclaimer section. But as always, blame me for whatever you don’t like or take offense to, not any current or past affiliation.

Super-Spiked Holiday Gift Guide and Favorite Energy & Climate Content Suggestions

If you are not fortunate enough to get a lump of increasingly valuable Coal in your holiday stocking—ideally with an EU carbon emissions credit included so you can safely display it on your living room mantle—you can ask Santa to help you purchase, subscribe, watch or listen to the following excellent energy, climate, business, and technology content during your holiday break. Happy holidays, Merry Christmas, and Happy New Year to energy bulls, bears, apocalypse never, and climate alarmists alike!

Favorite Energy & Climate Books I Read in 2021 (or slightly before)

To be clear, a recommended read is not necessarily an endorsement of the underlying views. I have always sought out a wide range of perspectives, which this list doesn’t do justice to.

Best book to understand the physical realities of energy and why no one should think an energy transition will be quick or easy:

Numbers Don’t Lie: 71 Stories to Help Us Understand the Modern World by Vaclav Smil on Amazon.

Favorite book pair to read on the risks of climate change. While I personally am more of the “Apocalypse Never” mindset, it is worth understanding the perspective of climate alarmists:

Apocalypse Never by Michael Shellenberger on Amazon
The Uninhabitable Earth: Life After Warming by David Wallace-Wells on Amazon

While I am a markets kind of guy, Professors Cullenward and Victor in my view do a great job making the case for strong public policy to address climate challenges and that markets alone will never solve the issue:

Making Climate Policy Work by Danny Cullenward and David Victor on Amazon

I am a big fan of my friend Bob McNally’s enjoyable-to-read history of boom-bust oil cycles. As a Goldman Sachs alum, the world of commodity trading is near and dear to my heart and I very much enjoyed Javier and Jack’s history of the business.

Crude Volatility by Robert McNally on Amazon
The World for Sale by Javier Blas and Jack Farchy on Amazon

Favorite non-Energy Books I read in 2021

Ponzi's Scheme: The True Story of a Financial Legend by Michael Zuckoff on Amazon. Remarkable how the original scheme by Charles Ponzi has echos in today’s bubble stocks.
Beyond Blockchain: The Death of the Dollar and the Rise of Digital Currency by Erik Townsend on Amazon. I need to spend more time understanding what comes after the US dollar as the world’s reserve currency.
Dark Mirror: Edward Snowden and the American Surveillance State by Barton Gellman on Amazon. Concerned about privacy or loss of civil liberties in the post 9/11 COVID era? Pretty sure most of us don’t know the half of it.

Staying on Top of Tesla & EVs

Favorite Auto expert on YouTube: Sandy Monroe of Monroe Live. Sandy has some great “mini-series” videos on the Tesla Model 3, Ford Mach-E, and numerous other vehicles. He is one of a kind.

Favorite Podcast/YouTube for Daily Tesla/EV News: Tesla Daily w/ Rob Mauer. While Rob is an unapologetic Tesla bull—and I have zero desire to wade into the toxic debate of Tesla’s share price valuation—I do find this daily update helpful in keeping me abreast of both Tesla and EVs more broadly. I find Rob to be a straight shooter, hard worker, and am appreciative of his willingness to publish a helpful daily podcast.

Podcasts: Favorite macro podcasts

The Grant Williams Podcast: this is a paid podcast and well worth whatever the subscription cost is...seriously, subscribe on Grant Williams website. Grant and at times Bill Fleckenstein provide excellent interviews and perspectives with various macro economists, investors, and thought leaders.
Macro Voices: Apple, Spotify. Another podcast with excellent weekly interviews with various macro economists, investors, and thought leaders by Erik Townsend. Erik’s short-term crude oil views are also always interesting as well.
Making Sense (Eurodollar University): Apple, Spotify. A unique, contrarian view of the Federal Reserve and monetary policy. Highly educational about the global monetary system. You can also read Jeff Snider’s excellent research blog on the Alhambra website at Jeff Snider research blog.