What if Green Energy Isn’t the Future

Oil field rig with casing ready for well completion ahead of perforation and testing program. Copyright Cmi Capital 2012

What’s Warren Buffett doing with a $10 billion bet on the future of oil and gas, helping old-school Occidental Petroleum buy Anadarko, a U.S. shale leader? For pundits promoting the all-green future, this looks like betting on horse farms circa 1919.

  • Warren Buffet finances Occidental acquisition of Anadarko – US$10 billion;
  • Market sentiment is broadly bearish on hydrocarbons. The oil and gas share of the S&P 500 Energy index is now US$225 billion, less than 1% of the index and the lowest in more than 40 years;
  • What happens if investments in renewables stutters, subsidies evaporate, or renewable delivery fails?
  • Mills states that the prevailing wisdom has renewables adding 250% more energy to the world in the next 20 years, more than shale has added in the past 15 years;
  • Oil and gas demand continue to rise and is forecast to continue this trend albeit at a more muted rate;
  • All the growth predictions assume that 75% of the renewable growth will come from the least wealthy countries, the emerging economies. Mills concludes this is unlikely unless radical cost reductions evolve.  Note that none of the wealthy countries met their green targets but that energy production was driven by increases in fossil fuel production.  70% of the growth was increased fossil fuel production;
  • “The reason? Using wind, solar and batteries as the primary sources of the nation’s energy supply remains far too expensive.”  Any mention of subsidy reduction exposes the full fury of the green lobby … who receive ample funding from the renewables industry!
  • Already countries are reducing or removing renewable subsidies usually the result of unstable energy supplies, for example Sweden and Australia;
  • In the USA utilities have been adding massive fossil fuel burning diesel generators as backup to unreliable wind and solar, with little fanfare or comment;
  • Will electric cars solve the energy gap? Even a 100-fold increase in electric vehicles would only replace 5% of global oil demand of two decades. 

‘Green advocates can hope to persuade governments – and thus taxpayers – to deploy a huge tax on hydrocarbons to ensure more green construction.  But there is no chance that wealthy nations will agree to subsidize expensive green tech for the rest of the world.  And we know where the Oracle of Omaha has placed his bet.”  Full Article