Energy pinch can be good news

Stockmarkets hate uncertainty and richly reward the few investors who correctly see the future of an industry, an idea or a technology.

One of the biggest question marks facing the global economy today is how we can increase energy supplies by the additional 50 per cent forecast to be needed in the next 25 years and at the same time drastically lower our dependency on hydrocarbons, which currently provide 80 per cent of the world’s energy needs.
This sort of talk, which reached a climax last year with the oil price hitting US$78.15 ($105.74) a barrel and petrol prices rising every second day, prompted one of my clients to threaten to sell his Westfield shares because “people would not be able to afford to drive to the supermarket”.

Tim Bond, global asset allocation strategist of Barclays Capital, writing in Barclays 2007 Equity Gilt Study, reckons that to reconcile the increased energy needs of the developing world with the need to reduce CO2 emissions associated with climate change requires nothing short of an energy revolution.

Where Bond differs from our gloomy Westfield shareholder, however, is that he sees the change as being “highly stimulatory for the global economy”.

But first, some background: since 1998 real oil prices have tripled. At the same time the scientific case that global warming is down to humanity has hardened. In a nutshell, the world has realised that the current supply of energy will not match demand and, worse still, the type of energy we do have is incompatible with our survival.

Things look bad, but do we sell or buy?

The New Zealand Herald