![]() Today, these commodity prices are soaring, but the industry isn't spending like it did in 2014. In fact, they wouldn't listen to lawmakers to cut down on these traits and expand production. Big Oil leaders recognize the demand-moat of their output, the expensive barrier to enter, and the advantages of using profits for shareholder returns. You see, unlike Big Tech, which needs to keep investing in R&D to maintain competitive advantage and maintain growth, Big Oil has a very sticky demand that is maintained for decades with minimal Capex. According to a report by International Energy Forum and IHS Markit, despite global demand for oil and gas rebounding to 2019 levels, upstream investment in the sector remained depressed for a second consecutive year in 2021 at $341 billion, 23% below the pre-pandemic level of $525 billion. As management adopted better fiscal discipline, investment in new wells has crashed 60% since its peak in 2014. Some even invested in decarbonization to improve their image. As a result, Big Oil began using its cash towards raising dividends, reducing debt, and pursuing share buybacks. After over a decade of devastating losses and poor shareholder returns, these companies were forced to become more shareholder-friendly. Wall Street chastised the hydrocarbon industry for requiring massive Capex and carrying higher debt on their balance sheets. While many people have blamed high gas prices on the Biden administration and their net-zero vision, the real culprit has more to do with Wall Street than Pennsylvania Avenue. In recent years, energy has been a highly political subject, and the spotlight on this industry has turned Big Oil into a pariah. An Industry Transformed to Reward Shareholders A portfolio exposed to this commodity is well-positioned to experience tailwinds from inflation. electricity generation, among other critical economic needs. Today, we will review natural gas as an investment. ![]() It has become straightforward to identify what is valuable and is of utmost importance at present. With nations experiencing 40-year high inflation, priorities have changed. Germany, a nation often seen as a leader in climate action plans, is now firing up coal plants to protect itself from threats of Russian gas supply. The Russo-Ukraine war has triggered a significant energy supply and security crisis that has sent commodity prices soaring, with broader implications for the global economy. Perhaps even at the expense of angering the Green movement. ![]() Just a year after America elected a new administration with an ambitious plan to address climate change, global events have resulted in soaring energy costs, and leading economies are now discussing "energy independence" as a priority. We see higher prices at the pump, and our favorite services are adding a fuel surcharge to combat rising logistics costs. Dusanpetkovic/iStock via Getty Images IntroductionĮnergy is a hot topic today.
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