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Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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Is Bill Gates Right On Energy Investing?

Not long ago, Bill Gates offered some investment advice. That, in itself, constitutes news, but the content and the reactions make up a more interesting story.

Gates told the Financial Times, in essence, that investors who want to do something about climate change should stop making up lists of companies they do not want in their portfolios based on involvement in fossil fuel production or use. They should, instead, invest in disruptive technologies that will provide actual solutions to climate change.

Environmental-social-governance (ESG) investors have pushed back on this position partly on moral grounds. But there are economic reasons as well. Their withdrawal of capital, and demand that banks not finance fossil fuel projects limits the pool of capital available to fossil fuel companies, which raises their cost of capital. And their insistence that fossil fuel companies more explicitly lay out risks to shareholders sets on notice fiduciary investors, who do not want to have to explain, afterwards why they made an investment in disregard of warnings. But the actions of ESG investors are essentially negative, and possibly of limited effectiveness, given the huge cash flows that oil companies generate. The oil companies can continue to do what they always did. And the capital market boycotts do not create solutions.

Okay, easy advice for Bill Gates to give, because he and his fellow billionaires have the money and contacts to acquire interests in those disruptive technology companies before they go public. The rest of us don’t. We will, as consumers, pay for the new technologies that will make the original investors richer.

Some energy experts have said, don’t worry, the big energy firms will make those investments, and they have the money to do it. In truth, some giant energy firms have looked into doing so. Royal Dutch Shell, for instance, set up a team of executives to figure out how. They immediately ran into the problem. Shell is the biggest dividend payer in the world. It wants to maintain that dividend of $16 billion per year. The bulk of cash flow comes from the oil and gas business. It has invested in natural gas (lower carbon content than oil or coal) in windmills, in hydrogen energy, but all this green investing, no matter the prospects, cannot generate enough cash to pay that dividend. Shell will not make the Schumpeterian move, to dump the old business before it is too late, and go whole hog into the new. Shell cannot afford to be disruptive. Somebody else will have to do it. In that respect, Bill Gates is right. Related: Oil Markets: Everything Is About Weak Demand

Presumably the market will (eventually) furnish the capital needed to decarbonize the economy, but, so far, venture capitalists seem more interested in disrupting the taxi, restaurant, scooters and office space industry. They pour billions into those ventures. Meanwhile, the climate continues to warm.

We would suggest an alternative to waiting for the Silicon Valley crowd to come to our salvation. One that takes into account the need to secure public backing for the required social and economic changes. We believe that the nation needs one or several publicly sponsored energy and climate funds, similar in ways to Comsat, a government sponsored but privately financed and managed corporation that first launched our communications satellites. Anyone could buy a share in the new telecommunications technology. Why not something similar for climate change? Maybe allow payroll deductions for small investors or state-sponsored funds for local projects. Climate change mitigation efforts will succeed only if the public buys into the concept. And giving the public a chance to buy in, literally, might hasten the process.

So back to Bill Gates’ advice. Great idea. And, as the old saying goes, “What is sauce for the goose is sauce for the gander.” So why can’t the rest of us invest along with Bill?

By Leonard Hyman and William Tilles

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  • Jim Miceli on October 06 2019 said:
    Jimmy The Tapper here once again with News on News. The gist is , is to have a diverse Portfolio in by Book. Wind Mills;both Land and Sea-based. Solar Panel Systems and that of Water Generating Systems. Building a Home where there is little to no Utility can lead to cost overrun if Power , Water and Sewage has to be piped in. Alternatively , given Earth Sheltered Living and the many portable or land based Systems one could apply leads to an appeal to those that look to the Future with at least one fairly stable Oil Company. I like (BP). The price is right and the Dividend is decent. Finally , Bill should reassess (CAT).
  • Mamdouh Salameh on October 06 2019 said:
    When Bill Gates gives advice, the world should heed his advice. And why not? He is one of the world’s leading philanthropists, a hugely successful business man and a billionaire to boot.

    What he is telling would-be-investors who want to do something about climate change is to come up with solutions rather than merely boycotting investment in anything to do with fossil fuel production or use or divesting their holdings in fossil fuel companies.

    Therefore, the global fossil fuel divestment movement should heed his words. It should also heed four pivotal energy principles. The first is that there will be no post-oil era throughout the 21st century and probably far beyond. Oil will continue to reign supreme all through.

    The second principle is that there will be no peak oil demand either. While an increasing number of electric vehicles (EVs) on the roads coupled with government environmental legislations could decelerate the demand for oil, EVs could never replace oil in global transport throughout the 21st century and far beyond.

    A third principle is that with global oil consumption exceeding 100 million barrels a day (mbd), the notion of imminent energy transition looks like an illusion. In fact hydrocarbons accounted for 84.7% of global primary energy consumption in 2018. That remains so despite being challenged by serious environmental policies and despite a global expenditure of $ 3.0 trillion on renewable energy during the last decade. This is a hefty price to pay just to gain only a percentage point of market share from coal.

    The fourth principle is business opportunities. Global investment in renewable energy pales in size when compared with that in oil and gas exploration and production, refining and petrochemicals. The slower pace toward alternative energies is due to two key reasons. First, oil and gas will continue to be needed well into the foreseeable future. And second, and probably much more important, is that financial returns from renewables are nothing compared to the huge bonanzas from fossil fuels particularly oil and natural gas.

    And whilst wind and solar are being deployed quickly at an exponential rate, renewable energy installations are far too slow to catch the still-voracious appetite for fossil fuels. It is a fact needing acknowledgement in a world of over seven billion people, each of whom is wanting for more light, heat, mobility and gadgetry.

    Rather than wasting their time in exerting pressure on investors to boycott fossil fuels or divest from them, the divestment movement should adopt a more positive approach and encourage investments in innovative clean energy.

    Any innovative energy ideas have to be more cost-effective, durable, practical, efficient and plentiful than the energy sources they are seeking to replace otherwise they wouldn’t to succeed.

    Solar power will in time become the ultimate source of global electricity generation and the power to drive water desalination plants and banish drought from the world because it fits all the criteria mentioned above.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Gumby Koontz on October 06 2019 said:
    We already did the Comstat thing on solar and wind , but this actually forced Big Oil to abandon high cost offshore oil production literally overnight and switch to shale rock oil that was long thought to be higher cost than offshore drilling. We were fooled by Big Oil.
    On the plus side, our solar and wind movement forced Big Oil to lower oil prices which in turn encourage us to consume more oil than before despite increased fuel efficiency.
    Even worse, we are now moving toward electric vehicles with flawed assumptions that we will have plenty of solar and wind energy to charge them all . this is not true..
    What is actually happening is ... utilities are actively assisting almost anyone even your next door neighbor install what is called "industrial generators" that are ten times bigger than your portable emergency generators .. or even bigger.
    Utilites has no way of keeping your electric vehicles charged at your homes .. with few exceptions because of the limitations of transformer capacities as well as substations. We will have worse air pollution in our towns and cities , thanks to industrial generators and DER programs that is being expanded beyond solar rooftops and wind turbines to allow industrial generators be included.
    Big Oil will continue to pump ever more barrels of oil and gas as always.
    and paying dividends..
    China use so much coal to supply the free world with cheap aluminium we desperately need for solar and wind programs..
    Nothing is working for climate change at all.
    we are still using firewood which usually require fossil fuel to fall trees, chop/split into logs and haul to stores miles away. Firewood costs $300 a cord that is equivalent to $10 a ton of coal in energy output. We input so much fossil fuel into firewood production that it is expensive and fun to use.
    Tell me, are you really serious about climate change or are you just blissfully ingorant? thank you!
  • Suqi Madiqi on October 06 2019 said:
    The only thing that'll disrupt oil is a battery of equal energy, size and cost.
  • jone al sharon biriyani indian on October 09 2019 said:
    Climate change has created lot of employment in the Media/Entertainment sector in the developed world. i the rest of the world including china/India and else where it has created
    Bank dacoity of untold proportion(vis as is past bank looting records, say in india)

    In India for example (china of course this is happening in stealth mode)
    in the guise of fighting climate change anyone and everyone who knows someone somewhere with access to central/state government funds are looting cash for developing so called renewable energy.
    the fact is no ' eff-ing solar farm is worth talking about as far as generating D.C. current is concerned. Other than creating maintenance jobs these solar farms are destroying birds, cancer. All these truth are covered up.

    Bill gates and hids greed-
    This SOb has no comutnig skills he is aliar. the American Millionare who was owing the Os software/Code was Mr Kil dhal died in 1994. He was cheated. This prik Gates stole his codes. and denies. it is alegla case that as usual could not go to trial thanks to his genius Pr guys.

    That is all.

    Besides stealing windows GUI is another hiest of Gates. I think Visiclac launched the Windows software in the annual LAS Vegas expo in the 80s. ths punk was there and stole and launched it as his invention.
    Likewise many other steals. including Ms office -which as you all know was known as Lotus software (excel is nothgin but lotus 1-2-3; lotus notes..)
    )last it was part of IBM.

    So this guy is now creating a new world disorder ( he is George Bush of corporate world minus the military weapons. He has already got a bunch of stooges form india in wallstreet/silicon valley, including mastercard, visa, of course satya nadella etc) like his america inc army of thieves to enforce climate change ideas and force money out of banks, government across the world. He is a silent killer.

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