Maria’s Note: Today, we hand the reins to Rogue Economics senior analyst John Pangere.
John is Nomi’s co-editor at our Rogue Strategic Trader advisory. And he has done just about everything in the investing world…
He’s got an engineering degree from Purdue University. He managed multimillion-dollar construction projects before switching to finance. And he’s also a former investment banker. As a banker, he worked on late-stage venture deals and with early-stage startups.
In the essay below, John explains the current energy wars taking place in the world and what it means for our growing electricity needs. He also offers one way you can turn this crisis into an opportunity…
“If anything will lead to future volatility, it’s the IEA’s repeated calls to stop investing in oil.”
Those are the words of Haitham Al Ghais, Secretary General of OPEC – the world’s most powerful oil and gas organization.
By now, many of you know that OPEC countries recently announced massive cuts to their production.
In total, the cuts amount to about 1.6 million barrels per day. These cuts came on the back of oil hitting 52-week lows.
And they had an immediate effect on the price of oil.
According to Reuters, the announcement pushed up the global price of oil by $5 per barrel to $85 per barrel.
And the average price of oil is estimated to continue to rise this year.
The news also kicked off a war of words between OPEC and the International Energy Agency (IEA).
So today and tomorrow, I’ll go into why this war between OPEC and IEA is so important… what it means for our growing energy demands… and one way we can prepare for what’s coming.
The Changing Nature of the IEA
The IEA, an autonomous intergovernmental organization, started back in 1974. Its goal is to ensure the worldwide security of oil and gas assets.
But in recent years, the IEA changed. Today, it resembles more of an activist working against the very thing it’s supposed to protect.
In fact, in its “Net Zero by 2050” report released in 2021, the IEA advocated for a reduction in oil exploration and production to reach net-zero emissions.
It went as far as to say that there is no place for new oil and gas projects. That’s a trend that’s already in play today.
After peaking about a decade ago, capital spending by oil majors fell off a cliff.
Some of that has to do with giving more profits back to investors through dividends or share buybacks.
But much of it has to do with activists forcing the hand of oil and gas companies to pull back on spending. More and more of that includes the IEA.
The very agency tasked with the security of oil supplies and prevention of oil shocks is now calling for a shock to the system.
A Shot Across the Bow
Now, before getting into the implications of the IEA’s response, let’s take a look at how the current war of words between OPEC and the IEA started.
Last Wednesday, IEA Executive Director Fatih Birol gave an interview on Bloomberg TV. During the interview, Birol said that OPEC should be “very careful” with its production policy.
The IEA criticized OPEC’s decision to cut production capacity. According to the IEA, OPEC was pushing oil prices up during a time of supply crunches and high inflation.
That prompted a response from OPEC. Its leaders said that “the world’s leading energy authority should be ‘very careful’ about undermining industry investments.”
This isn’t the first time that OPEC and the IEA clashed.
In recent years, Birol criticized OPEC for its production policy. And in turn, OPEC criticized the IEA for its repeated attacks on the very resource it should be advocating for.
While the IEA is seeking to massively reduce the use of oil and gas around the world, OPEC is taking a different stance.
OPEC ministers have said that a strategy of dual investment in both hydrocarbon and renewable projects is necessary.
They argue that will help avoid energy shortages and disruptions to help meet rising energy demand.
Winners and Losers
I’m not here to talk about who’s right or wrong, though.
I leave the politics to others and instead try to look at the big picture of what’s happening… and how to position for it financially.
The truth is, the demand for fossil fuels isn’t going away. Neither is our insatiable demand for energy in general.
Check out the chart below. It shows the expected future demand for electricity worldwide.
More than ever before, we’re plugging in various devices. We’re increasingly buying and using more electric vehicles (EVs). And that trend isn’t slowing down.
But all of this demand is creating massive strains on our electrical grid.
For instance, we’ve all heard about problems in states like California and Texas. Massive power outages. Rolling blackouts. Limits on electricity usage. And these are just some of the issues facing those states.
In fact, last year in California, state power grid officials warned customers of potential blackouts. The situation was so bad, they suggested customers “set thermostats to 78 degrees or higher, avoid using large appliances and charging electric vehicles…”
This was just days after the state voted to phase out the sale of new gas cars by 2035.
It’s part of the reason why the world needs to spend $14 trillion over the next 30 years to support the evolving power landscape. That’s an estimate from Bloomberg New Energy Finance (BNEF).
In other words, we need more reliable power that can handle freak weather events… And the surge of new devices that we plug in every day.
For that reason, my colleague Nomi Prins set out to find a solution to the current energy wars taking place today.
She’s focusing her attention on a new sector in the world of energy. In fact, it could be the answer to America’s – and the world’s – energy problems.
And only one firm in America has the federal license to produce it.
That’s why on Wednesday, May 10 at 8 p.m. ET, Nomi is holding a special Power Shift 2023 briefing. (RSVP instantly here.)
She’ll dive into the details of how you can play this company for less than $2 a share. And she’ll show you how it could help you turn a crisis into an opportunity, by handing you as much as 20x your money in the long run.
To make sure you don’t miss out, reserve your spot here with one click.
Then, tomorrow, I’ll further delve into why our current system can’t handle our growing energy demands… and why the complete transition into renewable sources of energy won’t happen anytime soon.
Stay tuned for more.
Senior Analyst, Rogue Economics