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Time To Overweight Renewable Energy

Jun. 14, 2020 1:02 PM ETGCTAF, TSLA, VWSYF16 Comments
Frank Holmes profile picture
Frank Holmes


  • Oil consumption could very well have peaked in 2019 at about 100 million barrels per day.
  • Some see the rise of remote working as the biggest threat to oil demand going forward.
  • Coal use in the U.S. has been in decline, and in 2019, electricity generated from renewable sources surpassed coal for the first time in over 130 years.
  • The S&P Global Clean Energy Index was up almost 45 percent for the two-year period through June 5.

It may not feel like it, but West Texas Intermediate oil just posted its best month on record. The American benchmark for crude soared more than 88 percent in May, from $18.84 per barrel to $35.50, as businesses cautiously began to reopen and people returned to work following the coronavirus lockdown.

Even so, global oil demand may never fully recover to pre-coronavirus levels, according to some analysts. I believe this makes alternative and renewable energy producers even more attractive from a long-term investment point of view.

Demand for oil in 2020 may end up being 10 percent lower than the previous year, according to estimates by Bloomberg Intelligence analysts Rob Barnett and Salih Yilmaz. What’s more, oil consumption could very well have peaked in 2019 at about 100 million barrels per day.

“The coronavirus-driven demand shock will probably keep a lid on oil prices for the next six to 12 months,” Barnett and Yilmaz wrote in a research report dated June 4, “and structural changes stemming from the crisis may permanently reset the bar lower.”

But what “structural changes”?

Working from Home

Some see the rise of remote working as the biggest threat to oil demand going forward. Among the many companies that have already told their employees they can now work from home—permanently, if they choose to—are Twitter, Square, Facebook, Shopify and Coinbase.

This may be good for shares of Zoom (ZM) and other teleconferencing companies, but not for oil demand.

About 45 percent of each barrel of refined oil is used to make gasoline. So when working from home becomes the norm for a large percentage of people, it’s only natural that a substantial amount of oil demand will be wiped out.

And that’s before we factor in the growing popularity of electric vehicles, which is also taking a

This article was written by

Frank Holmes profile picture
Frank Holmes is a Canadian-American investor, venture capitalist and philanthropist. He is CEO and chief investment officer of U.S. Global Investors, a publicly traded investment company based in San Antonio, TX, that oversees more than $4 billion in assets (Nasdaq: GROW). He is known for his expertise in gold and precious metals and launching unique investment products. Holmes also serves as executive chairman of HIVE Blockchain Technologies, the first publicly traded cryptocurrency mining company (TSX.V: HIVE).

Analyst’s Disclosure: I am/we are long VWSYF, GCTAF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (16)

"The new SG 14-222 DD turbines, which feature blades measuring an incredible 108 meters (354 feet)", he said with a mischievous grin.

To give you some idea of how massive this machine is, the Statue of Liberty clocks in at 305 feet, meaning each blade is about 50 feet longer." Brings tears of joy to my engineer eyes.

Are we still covering these limited life unrenewable worn-out monstrosity size blades 'made from resins of glass fiber reinforced polyester, glass fiber reinforced epoxy, and carbon fiber reinforced epoxy' under dirt in land fills? We can't seem to produce any form of energy without creating unintended problematic consequences. Not to mention the free market anomalies resulting from the governmental subsidies not addressed by this author?

Renewables were to be our economic salvation & 80% of the market benefits Spain and the Danish interlopers whose stocks don't even trade here? And the remaining 20% market share? Sounds like the Asian dominance of the U.S. solar energy industry.

Does Siemens maintain this equipment better then the Spanish company who lease and mismanage the Indiana Toll Road ? The pot holes and restrooms are so bad my 7 year old grandson sent them a complaint letter.

A few too many questions for this 'old school' investor and former consultant to a dozen or more auto and power industry clients. But, not above 'self interest' I will admit to driving an Asian hybrid but only the 'one' with a lifetime warranted battery.

Also, I did own CWEN overnight once.
Dude, why not mention that revenues from renewable yield cos are much much more stable than any other stock around ?. Typically they have 20 Year contract. with triple A companies.
I'm long AES, AQN, CWEN, TERP, TRSWF and I'd like to own a couple of others.
Millennial Investor profile picture
I like renewables and I am looking to add to my portfolio besides $BEP which has done well for me. My worry is that while there is both a supply & demand problem for oil, wouldnt lower oil prices just keep people/companies on fossil fuels longer? If oil was trading crazy high and people were looking for an alternative, I would be 100% with you. But if oil is going to stay cheap, i dont see the short term benefit to renewables.

I am a nuclear-energy guy. I have read about technology being developed that could greatly speed up the decay of nuclear waste. that would be a game changer. in the meantime, renewables are an area I will stay in, especially as my millennial generation enters the market and prioritizes green energy.
Eric Bradley profile picture
Hedging my bets, have EPD for pipelines oil & natural gas. Also have BEP for renewables. Both pay great dividends and solid companies.
hivoltage profile picture
As long as the energy density of hydrocarbons is greater than batteries and the amount of energy produced is much greater than the amount of energy/work used to produce that energy is much greater with hydrocarbons than with windmills and photovoltaics, hydrocarbons will win out. Never has a weaker more diffuse and intermittent energy source replaced a more powerful, compact and reliable power source.
Ridiculous. My car has among the lowest range of any electric car, and I think it's far better than any gas car. I can't imagine ever getting a gas car again.
Hopefully, it has enough range to reach the next charging station.
@Frank Holmes - what timeline do you project for, let’s say, a 50% conversion to alternative electricity and EV vehicles in the US? What pace deadening do you see from low fossil fuel prices as a result of oversupply if demand continues a decline?
Just saying, right now (after 20 years of alarm sounding by alternative energy bulls), There is zero substantial infrastructure for EV’s, I would say between hydrogen and electric the game is still being played on the dominator, in countries that have made substantial changes to wind/solar/water, they are finding many gaps in the ability to maintain electric supply for long periods or low input.
Don’t get me wrong, I believe fossil fuels will be phased out over time, but I can’t see this going main stream for at least another 20 years, which means there will be a nice bull rush and then a retraction for alternative energy companies. Many are still being subsidized as well, so the market hasn’t spoken and favored in large amounts yet.
Alternative energies are not free of environmental impact by any means, with regards to the land consumption for wind and solar, and the extremely target toxic manufacturing process or even recyclability of EV batteries, how will the world keep up with the demand of the vehicle requirements currently in existence?
0 infrastructure? Telsa has a bazillion chargers, so do other companies like Chargepoint, and other car makers are making or partnering with charging companies to build more fast charging stations like Tesla has built themselves.
I expect small modular reactors will be much cleaner overall than wind/gas, more reliable, and MUCH safer. With mass production, the cost will be lower as well. Its biggest disadvantage is misinformation.
Bay Area Kid profile picture
Terrible idea, since we have no way to treat nuclear waste. Any accident would contaminate the area for thousands of years
Dr. Luis Contreras profile picture
@Frank Holmes - thank you for a great post
Mark BM profile picture
I'm sure all I'll hear is the politics angle of this topic. But I believe that regardless of personal support or not for fossil and renewables, the trend is clear. Those who want to put money based on their personal view, go ahead. Those who want to see their investment grow incredibly over the next 10 years, this is a good card
Mark BM profile picture
$ICLN is a good combo with different sources of renewables
Kanikoski profile picture
Agree. Clean energy ETFs have had a good couple of years. $ICLN and $TAN get frequent comments on here, but I've had good results with relatively new $ACES, too. I'm long all three.
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