Ferg's Finds
This is a short weekly email that covers a few things I’ve found interesting during the week.
Article(s)
The Window Is Closing Fast on the Fed - Marko Papic
Podcast
Louis, as usual, is well worth a listen: Jacek Bartosiak, Albert Świdziński, Louis-Vincent Gave on the structural imbalance in world economy.
Quote
“99% don't want advice; they want validation for their decisions”
Tweet
.Christine is pumping out the value and is a must-follow if you’re interested in oil & gas.
Charts
This chart from Lars Schernikau shows what a failure Germany’s Energiewende has been. A 93% increase in installed net power capacity to achieve a 1.8% increase in gross power. Put another way, Germany has increased renewables to 55% of their net generation capacity, yet they only make up 28% of gross power production or 5% of primary (this poor conversion is largely due to crap capacity factors, i.e. German solar achieves an 11% capacity factor which is roughly half the capacity factor countries that are suited to solar are achieving.)
Something I'm Pondering
I'm pondering how we have set ourselves up for years of pain by incentivising low EROI energy.
A big reason Vocker got on top of inflation was a CAPEX boom in oil and gas. It also didn't hurt he was hiking into 30% debt to GDP vs today's 130% debt to GDP.
While I couldn't find a chart to illustrate oil and gas CAPEX going back to the 1970s, I did find the below chart; what is fascinating is that the US was spending an equivalent level on oil and gas incentives to what they have spent in the last four years on primarily renewables.
Over-investment in high EROI oil and gas is great for society, even if investors got torched. However, when you over-invest in low EROI renewables, society and investors get screwed. Then you still need to come up with the CAPEX to rectify the situation in a tight money, high inflation and short energy environment.
I’m doing my quarterly “ask me anything” on Crux, so feel free to reply to this email with any questions you want me to tackle on the show.
I hope you’re all having a great week.
Cheers,
Ferg
P.S. My favourite interviews are with people you can tell live and breathe the sector. Christine is one of those people, having worked for the likes of Chevron and Hess Corp since 2000. She hurt my brain with how much value she crammed into this chat. Christine came packing slides and worked from high-level supply and demand down to granular detail in why she is positioned in the companies she is in.
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Hi Ferg
My questions for crux AMA
Can you give an update on your coal thesis and if you have any different views on the sector now post the European winter. Glencore seems to have set long term contracts with the Japanese at US$200 for NEWC thermal.
Also would appreciate your thoughts on met coal plays SMR.AX, HCC, AMR especially after Glencore potential acquisition of TECK
Cheers