I wish I still lived in the Aspen bubble. Alas, however, the need to be closer to advanced health care necessitated a move to Denver.<\/p>\n
Those living in the bubble, though, have clearly not gotten the message that investors are shunning the fossil fuel industry. Two of the most out-of-touch Aspenites reacted with venom to my comments that investors were going to starve the fossil energy industry. One, a brilliant columnist, offered several arguments in attempt to refute the inevitable destruction of the energy industry. However, the facts are the facts.<\/p>\n
Start with a Wall Street Journal article on June 6 titled \u201cShell\u2019s CEO seeks to lure investors back to the oil sector.\u201d The keys to the Shell approach are simple: Pay large dividends, invest in renewables, invest in electric generation, and repurchase shares. Investment in exploration and production will be very limited. Revenues from the production of oil and gas will fund capital expenditures in renewables. Hydrocarbon reserves will be harvested to fund low-carbon and no-carbon businesses.<\/p>\n
The commentators also raved about the \u201cexplosive growth in fracking\u201d in the United States. Its a great line. It is ancient history. A June 7 WSJ article titled \u201cFrackers Scrounge for Cash as Wall Street Closes Doors\u201d showed how times have changed. The article makes the point that the fracking boom is an illusion. Investor returns are negative. The last equity was issued in 2014. The game is ending.<\/p>\n
The commentators also assert that \u201cinvestors are often poor judges of a company\u2019s worth.\u201d The point is correct. However, firms in capital-intensive industries need investor confidence to raise capital. The energy industry is very capital intensive. Today, it cannot raise capital.<\/p>\n
Energy business is not part of the gig economy. Projects are large and capital intensive. New projects will not proceed without investor support. Facebook can expand on hot air. Shell cannot. Like it or not, the \u201cwarminites\u201d are winning.<\/p>\n
Philip Verleger<\/p>\n
Denver<\/p>\n