The price of oil is once again grabbing headlines, with its watchers and markets consistently indicating that more of the commodity is needed now, regardless of the green transition that governments envision.
The price of West Texas Intermediate (WTI)—the U.S. crude oil benchmark—hit a seven-year high on Feb. 4 when it topped US$92 a barrel. That same day Bloomberg reported that gas prices across Canada broke an all-time record with a national average retail fuel price of $1.516 per litre, based on data from fuel-price tracking site gasbuddy.com, which has data going back as far as 2008.
But Dan McTeague, president of Canadians for Affordable Energy and a former Liberal MP, told The Epoch Times that the problem is more fundamental in nature and that prices were already moving higher before Russia renewed aggression against Ukraine or any cold weather spells hit.
“It’s very much a product of undersupply, mostly driven by under-investment or deliberate strangulation of capex [capital expenditures] needed to produce [oil and gas],” he said.
McTeague said Ontario gas prices are heading for $1.75 a litre—that’s 10 cents higher than what he predicted in December for what the price would be sometime between the end of February and early May.
“What this really means is that people have got to start to … get a grip, and get real, because you can’t do without fossil fuels.”
And this applies to making electric vehicles (EVs) as well, McTeague points out.
The growth of EVs is ramping up given high gas prices and continuing government efforts to build out charging infrastructure.
But energy analysts Jackie Forrest and Peter Tertzakian said on their Feb. 1 ARC Energy Institute podcast that the demand for internal combustion engines is not exactly dropping and that the growth of EVs has a while to go before it makes a dent on the user base of combustion engines.
“You’re looking at the wrong metric, say growth in electric vehicles. You should be looking at the retirement of combustion engine vehicles being taken out of the fleet,” Tertzakian said. He added that the number of retirements is actually going down, not up.
He offered his forecast of when oil demand might subside.
“It’s going to be a long time before the oil demand curve rolls over—like I think optimistically will be around 2030.”
Markets Know What They Like
Stock markets have also clearly signalled where they think future returns are coming from. Over the past year, traditional energy stocks have significantly outperformed the market, completely obliterating green energy stocks, which are lagging badly.
Some of the S&P 500’s top gainers in the past year were oil stocks, like Devon Energy up over 160 percent, Marathon Oil up over 130 percent, ConocoPhillips up nearly 100 percent, EOG Resources up over 85 percent, and Occidental Petroleum up almost 60 percent. Two of the biggest names Exxon Mobil and Chevron are up about 55 percent and 50 percent respectively.
Just in January, energy was the top performer on the S&P 500, up 19 percent month-over-month, whereas the overall index was down just over 5 percent.
On the Toronto Stock Exchange, 2022 has continued to be a good year for the energy sector, as it is up about 17 percent year-to-date, with the overall market roughly unchanged.
In comparison, the WilderHill New Energy Global Innovation Index is down over 15 percent year-to-date and over 40 percent in the last year.
McTeague says this indicates that markets are saying clean energy stocks and the green transition are only viable if they are massively subsidized.
“The only way in which they’re viable is with heavy amounts of government subsidies, and massive amounts of public taxation, and significant distortions in the market.”
RBC Capital Markets’ global head of commodity strategy Helima Croft, in an interview with BNN Bloomberg on Feb. 7, raised a question about the green energy transition: “Over the medium term, are we going to potentially have a situation where we don’t get sufficient investment in the commodity that we need now because we’re very focused on the transition?”
In the ARC Energy Institute podcast, Tertzakian had commented: “Everybody thought the industry was dead, it’s the end of oil, etc, etc. Now we’re finding out that—wait a minute—we still need this stuff.”
Canada Is Less Appealing for Foreign Capital
The Canadian Association of Petroleum Producers (CAPP) is forecasting a 22 percent increase in natural gas and oil investment in 2022. Capital spending in the sector is expected to grow by $6 billion to reach $32.8 billion, as Canadian producers try to capitalize on high prices, CAPP added.
However, investment in the oilsands has been plummeting for years due to environmental, social, and governance (ESG) factors. Foreign companies have been leaving or downsizing operations, and the companies that continue to operate are distributing higher dividends to shareholders instead of using it for exploration and production.
“Within the context of total global investment, Canada is continuing to lose market share to other jurisdictions,” CAPP said in a statement on Jan. 20.
CAPP noted that in 2014, when crude oil last topped US$100 per barrel, Canada was viewed as “a top tier international investment jurisdiction for resource development” and attracted more than 10 percent ($81 billion) of total global upstream natural gas and oil investment. Today, based on a forecast that the total global upstream investment will reach $525 billion in 2022, Canada’s market share has fallen to just 6 percent, CAPP said.
“We have seen a decline in being able to attract capital to this country. And I think that’s a very dangerous thing,” McTeague said.
Given the immediate and ongoing need for oil, the lower level of capital investment in the oilsands is coming at a bad time. McTeague says he worries about the average Canadian being able to make ends meet while fighting a losing battle.
Not only that, but the green transition is empowering the likes of Russia and China, McTeague adds.
“The green narrative is an extravagant cost that none of us should pay or need to pay. And countries like Russia and China are laughing at us because they’re not prepared to go down this woke road.”
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