Al Gore recently gave an interview in which he said the "carbon bubble" is going to burst and warned investors to stay away from the stocks of oil companies:
The valuation of those companies and their assets is now based on the assumption that all of those carbon assets will be sold and burned. They are not going to be burned. They cannot be burned and will not be burned. No more than one-third can ever possibly be burned without destroying the future.
Note in the interview Mr. Gore does not seem to make any distinction between natural gas and oil. Big mistake. The second big mistake is saying that oil is "not going to be burned" without saying exactly what is going to take the place of gasoline and diesel powered cars and trucks. If Gore is implying that fully electric cars are going to do the job, as people have been saying for years, the simple response is, "Where are they?" Yes, I understand Tesla has been successful selling some EVs to the high-end market, but is that really a solution to the US (and the worldwide) car and truck fleet? And if EVs are the solution, why doesn't Gore acknowledge that the US still relies on coal, the dirtiest of all fossil fuels, for ~40% of its electricity? How can EVs be the environmental solution if we are recharging them with a 0.4 factor with coal when coal emits ~50% more CO2 than does natural gas and coal leaves a plethora of toxic heavy metal compounds in the fly-ash after it is burned?
Natural Gas To The Rescue
As I have been writing for over 5 years now, so-called "environmentalists" are making a huge mistake by lumping natural gas in with oil and coal as "no-good fossil fuels." Cities all over the world (including the US) are increasingly purchasing natural gas busses to run their city routes and transport school children. Why? Because natural gas costs half as much as gasoline and it cuts CO2 emissions by ~30% and toxic particulate emissions (i.e., smog) by 100%. Al, please buddy, you need to realize something:
Natural gas is part of the solution, not part of the problem!
Every Major Country Except the US
As I have reported in my many articles on natural gas transportation - China, Russia, the EU, and Brazil have all passed strategic long-term energy policies that put a priority on natural gas transportation. The notable exception is the US. And this is ironic (and very sad...) considering the US's August foreign oil import numbers:
- 308 million barrels of petroleum imported
- 52% of US supply
- $111.28/barrel average price
- $34.3 billion total cost of imports
And that's only one month. In addition, the US pays 3-4x less for natural gas than do most of the countries that have passed policies to prioritize natural gas transportation. And of course the US has paid the price in terms of military expenditures and engagements the world over in the quest to obtain and secure petroleum imports.
Failure Of Pragmatic Leadership
So the US clearly has a failure of pragmatic leadership (including Al Gore) when it comes to adopting a strategic long-term comprehensive energy policy like the one I have been advocating for over 5 years now. You can read it here (feedback encouraged). Ironically, so-called "environmentalists" like Al Gore have actually made things worse by supporting EVs at the expense of natural gas transportation: we are increasing coal consumption to recharge EVs and the lack of EVs available to the common man means a continuation of the status quo of burning gasoline and diesel instead of cleaner, cheaper, and domestically produced natural gas.
Summary and Conclusions
I would love to tell you that the world no longer needs oil and that Al Gore is right. But the truth is this: the world, and the US in particular, has been very slow to grasp the significance of transitioning over to natural gas transportation. As a result, oil (gasoline and diesel) is going to be burned for a long, long time. For the first time in 4 years, the world is going to see the economies of the US, the EU, China, and Japan all expanding in 2014. That bodes well for oil demand and oil prices. So, hold on to companies like ConocoPhillips (NYSE:COP), Chevron (NYSE:CVX), and even sluggish old ExxonMobil (NYSE:XOM). All of these companies will be key producers of oil in the years ahead. And all of these companies have significant reserves of natural gas. Make no mistake about it, natural gas transportation is going to happen in the US. There is simply no realistic alternative to solve the economic, environmental, and national security issues we face as a result of our decades old addiction to foreign oil imports.
Disclosure: I am long COP, CVX, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am an engineer, not a CFA. The information and data presented in this article was obtained from company documents and/or sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Please do your own research and contact a qualified investment advisor. I am not responsible for investment decisions you make. Thanks for reading and good luck!