Great article as usual. China and India import allot of their coal. China was suffering energy shortages in recent years because they embargoed coal from Australia which was one of their main suppliers.
"Environmental factors like clean air, clean water, and biodiversity can go hand-in-hand with an improving economic outlook and pressure will remain to take these factors into account."
The surest way to protect the environment is to grow people's wealth. People who are poor and barely getting by don't have time to worry about the environment. It's only when people get to a level of wealth where they aren't constantly worrying about basic survival that they can and do start worrying about the environment.
Thanks again for a great post Arjun. The irony of coal having the clearest demand outlook became very apparent after Germany outbid others for LNG last year and then burned a lot of it rather than continue to use their nuclear reactors. As you have noted previously, what developing country wants the risk they won't be able to access LNG at a reasonable price, if they have abundant coal available to keep their grid and heavy industry operating? While you note most developing countries have state controlled companies, so investment is impossible, what about imports? Are western coal companies only selling to their domestic markets? I keep hearing Porter Collins and Vincent Daniels of Seawolf (The Big Short veterans) in their quarterly segment of the podcast their former colleague Danny Moses co-hosts (On the Tape) talk about their position in BTU that they've been building for a while - a great balance sheet, return of capital play. I'm a bit skeptical, as coal appears to have a worse reputation than oil and gas. So how many fund managers/institutions will buy shares, even if the balance sheet/returns on equity look great, which you need these days for any chance of multiple expansion. Your thoughts?
About fund managers buying coal - There are a few of them, probably the most well known is David Einhorn of Greenlight Capital, who owns about 5% of Consol Energy (CEIX). CEIX is emblematic of the fact that Western coal companies export most of their coal (by value). My understanding is that few coal investors expect stocks to rerate, rather they are content to receive 12-30% shareholder returns (dividends plus buybacks).
You are right that coal has a worse reputation than oil and gas, however coal companies fly under the radar because they have low market cap, are not well known, and don't sell directly to consumers like oil companies do.
Thanks! Now I get it. Vincent Daniels made a strange comment about these type of stocks being like a "grandma stocks" in the last podcast I listened to him discussing this topic, but I think he meant it in a good way-as in relatively safe bets. As I just entered that age range, some dividends and share appreciation via buybacks sounds good to me.
Arjun, another outstanding piece that is unassailable in its logic. The real interesting question is what will the world look like if in fact politicians force the energy system to move to less efficient sources (from an energy density and effective cost when including reliability)? Luke Gromen has made the case that the entire global sovereign debt bubble is only sustainable with ample supplies of affordable oil and natural gas ...
Thank you Weston. I am an optimist that the insanity that represents mainstream western world energy transition ideology cannot and will not persist. Europe may be too far gone, but we are not...
To me it starkly reveals the difficulty of forecasting future oil demand. How much can the group on the left reduce demand? How much will the rest increase it? Mind-boggling.
Thanks for an excellent piece plus heads up on Kamau interview.
Thank you Andrew.
Great article as usual. China and India import allot of their coal. China was suffering energy shortages in recent years because they embargoed coal from Australia which was one of their main suppliers.
"Environmental factors like clean air, clean water, and biodiversity can go hand-in-hand with an improving economic outlook and pressure will remain to take these factors into account."
The surest way to protect the environment is to grow people's wealth. People who are poor and barely getting by don't have time to worry about the environment. It's only when people get to a level of wealth where they aren't constantly worrying about basic survival that they can and do start worrying about the environment.
Thank you Robert.
Thanks again for a great post Arjun. The irony of coal having the clearest demand outlook became very apparent after Germany outbid others for LNG last year and then burned a lot of it rather than continue to use their nuclear reactors. As you have noted previously, what developing country wants the risk they won't be able to access LNG at a reasonable price, if they have abundant coal available to keep their grid and heavy industry operating? While you note most developing countries have state controlled companies, so investment is impossible, what about imports? Are western coal companies only selling to their domestic markets? I keep hearing Porter Collins and Vincent Daniels of Seawolf (The Big Short veterans) in their quarterly segment of the podcast their former colleague Danny Moses co-hosts (On the Tape) talk about their position in BTU that they've been building for a while - a great balance sheet, return of capital play. I'm a bit skeptical, as coal appears to have a worse reputation than oil and gas. So how many fund managers/institutions will buy shares, even if the balance sheet/returns on equity look great, which you need these days for any chance of multiple expansion. Your thoughts?
About fund managers buying coal - There are a few of them, probably the most well known is David Einhorn of Greenlight Capital, who owns about 5% of Consol Energy (CEIX). CEIX is emblematic of the fact that Western coal companies export most of their coal (by value). My understanding is that few coal investors expect stocks to rerate, rather they are content to receive 12-30% shareholder returns (dividends plus buybacks).
You are right that coal has a worse reputation than oil and gas, however coal companies fly under the radar because they have low market cap, are not well known, and don't sell directly to consumers like oil companies do.
Thanks! Now I get it. Vincent Daniels made a strange comment about these type of stocks being like a "grandma stocks" in the last podcast I listened to him discussing this topic, but I think he meant it in a good way-as in relatively safe bets. As I just entered that age range, some dividends and share appreciation via buybacks sounds good to me.
Again, thanks a million. I read a lot, but nothing is more helpful to me than “Super-Spiked”. PS I immediately ordered Cobalt Red.
Very kind of you to say Martin.
EXCELLENT!!!!
thank you!
Arjun, another outstanding piece that is unassailable in its logic. The real interesting question is what will the world look like if in fact politicians force the energy system to move to less efficient sources (from an energy density and effective cost when including reliability)? Luke Gromen has made the case that the entire global sovereign debt bubble is only sustainable with ample supplies of affordable oil and natural gas ...
Thank you Weston. I am an optimist that the insanity that represents mainstream western world energy transition ideology cannot and will not persist. Europe may be too far gone, but we are not...
I completely agree, Arjun. The energy evolution must focus on the inclusion of the 3.5 Bn people in energy poverty.
thank you Sean
Such a great overview of the state of play. Do you follow Roger Pielke Jr? Your second paragraph describes what he calls the Iron Law of Climate Policy https://rogerpielkejr.substack.com/p/the-iron-law-of-climate-policy
I am a big Roger Pielke fan and a former CU Buffs fan from those Sal Aunese and Kordell Stewart teams when I lived in Denver.
Arjun, that chart showing population vs energy demand is mind-blowing! Thanks for sharing.
Always appreciate your kind words Six Bravo.
To me it starkly reveals the difficulty of forecasting future oil demand. How much can the group on the left reduce demand? How much will the rest increase it? Mind-boggling.