Fossil Fuels and Renewable Energy Sources – Some Business Considerations

I often think about how the energy industry’s financial analysts view the fundamentals that apply to market valuations. Just now, I was reading some of the discussion at SeekingAlpha.com on ExxonMobil that attempts to get to the underlying buy/sell recommendations, and I note that the conversation is fairly bullish across the board.

In particular, though there is widespread agreement that the “easy oil is gone,” there is almost no recognition of a concerted move to get off of oil as a civilization. Moreover, the concept of “peak oil” (i.e., that the supply of oil will soon start to diminish) means that the price will soar, and that only companies with the scale of ExxonMobil (vs. the wildcatters of yore) will have the capability to play effectively. But there is precious little talk of the impact of electric transportation, or renewable energy in any of its forms.

I’m trying to figure out what that means. Here are a few points of speculation:

*  Clearly, the oil industry has done a good job at convincing both the legislators and the voting populace that a steady-as-she-goes approach is appropriate for the energy industry.

*  Though renewables continues to make inroads, relatively few people challenge the legitimacy of fossil fuels as the predominant source of energy.

*  The subsidies that are in place (12 times the size of those given to renewables) are clearly not going away; that discussion is not even on the table. This, of course, creates an environment of cheap oil and coal — thus affordable gasoline, thus no real demand for a replacement.

*  The US foreign policy of protecting the incoming flow of oil from the Middle East – even at the expense of ongoing military conflicts (not to mention sending them $1billion per day of US wealth) – raises the eyebrows of only a few, who are quickly written off as weirdos.

*  As we saw in our midterm elections, the conservative faction has successful convinced voters that progressive views in this space are radical — frighteningly out of touch and recklessly extravagant, that global climate change is a back-burner issue, and that rightwing politics is the best medicine for the country’s ailments.

I suppose all we can do is continue to tell the story.  We need to hope that masses of people realize the imperative to migrate to clean energy, and lean on their elected representatives to help great an environment in which this can happen. 

Looking for an effective starting point?  Pull all the energy-related subsidies and force all producers and consumers of energy to pay the comprehensive costs.  You’ll have renewable energy in a wicked hurry.