If you are at all interested in matters of climate and energy, you have probably read hundreds of articles over the past few years about the inevitability of the coming energy transition. A piece of the claimed inevitability is that all good and decent people support this transition as a matter of moral urgency; but it’s not just that. Nor is it just that government backs the transition with all its coercive powers, from subsidies to mandates to regulations. No, most importantly, the transition is said to have become inevitable due to unstoppable economic forces. Wind and solar are now the least expensive ways to generate electricity! Electric vehicles are superior and are taking over the market! And the legacy fossil fuel producers who refuse to change their ways are seeing their huge investments become “stranded assets” that can no longer compete in the new world and must be written off!
Well, look to Manhattan Contrarian as your go-to source for news on how this supposed energy transition is going. The summary is that all the mandates and regulations and trillions of dollars in subsidies in the world can’t make the impossible happen. Here are a few items from the past week:
Shareholder activists demand that BP re-commit to oil and gas.
The last few years have seen many examples of shareholder activists submitting proxy proposals demanding that the major oil and gas companies reduce their carbon emissions and commit to transition out of the oil and gas business. As one significant example, in 2021 an activist investor called Engine #1 demanded that Exxon commit to this transition. In a proxy contest in May 2021, Engine #1 succeeded in electing two directors to the Exxon board over management’s opposition.
Of all the oil majors, BP has gone the farthest in reducing oil and gas investments and expanding its presence in the “renewables” sector. But in the last few years, oil and gas investments have boomed, while investments in renewables have performed poorly. Now BP has attracted an activist investor taking the opposite side of the issue, demanding that it reduce its investments in renewables and recommit to oil and gas. CNBC has a piece on February 3 with the headline “Activist Bluebell believes BP is 50% undervalued compared to peers.” Excerpt:
Bluebell Capital Partners sent a letter to BP Chairman Helge Lund calling on the company to take several actions, including slowing its commitment to reducing oil and gas production by 25% by 2030 compared to 2019 levels, and challenging the company to reduce its investment in its transition businesses (biofuels, convenience, charging, renewables and hydrogen) by 60% between 2023 and 2030.
Bluebell asserts that BP’s commitment to reduce oil and gas investments and move into renewables has left its stock price undervalued by 50% compared to its peers like Exxon and Chevron. Bluebell claims to be avid environmentalists, but not at the expense of investment returns:
Bluebell is a passionate environmentalist firm that has a track record as an environmental activist investor. But it is also a financial investing firm and realist that understands the power of capital markets. . . . Bluebell states that they believe that the company is worth at least 50% more than the value currently expressed by its stock price and that it trades at a substantial 40% discount to best-in-class peers ExxonMobil and Chevron, “primarily due to an ill-conceived strategy aimed at drastically shrinking BP’s core business (oil and gas), on the one hand, and rapidly promoting a risky diversification into sectors with lower targeted returns and where BP has ‘no right to win’.” . . . Bluebell flat out says what many people are thinking – that [the goal of net zero by 2050] is an utterly unrealistic policy that should be declared by governments as unattainable with a more realistic target proposed to replace it.
CNBC calls the Bluebell letter “simply astonishing, and potentially [a] watershed.” They describe the Bluebell message as “a wake-up call to BP: end the collective hallucination and realign the company’s climate and production targets with reality.” Sounds about right to me.
EV sales decline dramatically in California.
We’ll never get to “net zero” if there are tens of millions of gasoline-powered cars zooming around on the highways. Which is why all right-thinking governments have decided that in short order everyone must switch to an EV. President Biden announced in April 2023 that 50% of all new car sales will be EVs by 2030, and he has “[u]nleash[ed] a Manufacturing and Clean Energy Boom and Accelerat[ed] the Production of Affordable Electric Vehicles.” California and New York have both enacted mandates that all new car sales be EVs by 2035. We know that these targets can be achieved easily because in California is setting the example. Its EV sales are soaring and the targets are clearly within range.
Unfortunately, according to the website Auto Spies on January 31, California EV sales have suddenly gone “on the decline”:
Despite a sustained and seemingly unstoppable growth, the registration of battery-electric vehicles in California experienced a downturn in the last quarter of the previous year. Notably, EV sales have consecutively declined for two quarters, even as California authorities set a 2035 deadline for all new vehicle registrations to be zero-emission.
Although up to now California has seen rapid increases in EV sales, this decline is significant (more than 10% for a full quarter) and has now set in when EV market share is only a little over 20% — far short of the mandated 100% set for just 11 years from now:
California recorded 89,993 registrations for electric light passenger vehicles in the fourth quarter, marking a 10 percent decrease from the 101,151 recorded in the third quarter. While the EV market still constitutes a significant portion of California's auto sales, accounting for 21.4 percent last year, questions arise about its future trajectory.
Perhaps they have just run out of rich people willing to buy an EV as a third or fourth car to use as a toy on the weekends.
New York’s offshore wind industry faces a “financial reckoning”
I have previously covered the collapse of New York’s grand offshore wind schemes in several posts this past fall, for example this one from October 15. But notably, even in the face of catastrophic news, the mainstream media sources have largely maintained their stance as cheerleaders for the energy transition.
Which makes the piece from Crain’s New York Business in their January 29 edition so noteworthy. The headline is “New York’s Offshore Wind Industry Faces a Financial Reckoning.” (behind paywall). Crain’s has definitely thus far been in the camp of energy transition cheerleaders. But this lengthy piece — 2/3 of the front page and two full pages in the interior — is filled with harsh reality. An excerpt from the front page:
The carnage is so severe that observers on all sides acknowledge that the state must rework some early deals to avoid the collapse of projects and serious setbacks to the state’s climate goals.
And from the interior, it’s much worse than even I had realized:
Empier Wind 2’s canceled contract sent shocks further down the supply chain. The day after Equinox and BP announced the cancellation, Sangapore-based Seatrium said its $250 million deal to build a substation for Empire Wind 2 was dead. So too was a contract with Dutch manufacturer Sir for turbine foundations. A contract for rock installation, which stabilizes the sea-floor around marine structures, with Texas-based Great Lakes Dredge & Dock corporation was also terminated. . . .
At the moment, New York’s climate gurus are out there scrambling to try to put something back together. Ultimately, it will never work; but it will be a good while before they admit that.
These are just a few data points from the past week. I might have to start a new 30-part series to keep up with all the news on this subject.
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