“If you’d said four years ago, ‘I’ve got a great investment idea for you — take half your money, burn it, take the other half of your money and put it under a mattress'… it would have been a terrible idea, a terrible investment strategy — except that it would have done better than the US oil & gas industry has done over the last four years,” Clark Williams-Derry told the Energy Transition North America conference on Thursday.
The energy finance analyst at the US-based Institute for Energy Economics and Financial Analysis (IEEFA) was explaining that US oil majors such as ExxonMobil and Chevron — which have failed to embrace the energy transition — have lost more than half of their market value over the past four years, and have subsequently become risky investments.
“In that context, renewables look a lot safer. And I think that’s part of the excitement we’re seeing around renewables — it’s actually a little bit boring now, whereas oil & gas are seen as a high-risk sector that you really have to understand what you’re doing in order to participate,” he said.
Williams-Derry told the Reuters event that the green policies of the incoming Biden-Harris administration should not be these companies’ greatest concern.
“It’s not going to be politics that’s pushing against Exxon, it’s going to be the company’s own investors,” he explained. “It’s going to be the investors calling them out for being very bad at their jobs, very bad at generating sustainable returns in a new environment and calling them out for not having pivoted [towards greener energy].”
He continued: “I think what we’re seeing right now is a flip-flop. It used to be that renewables were the speculative, risky investment. Five to ten years ago, if you invested in a renewables company you were investing in a speculative venture, maybe you were investing in new technology or an unproven business model.
“That has flipped. Now renewables are kind of like the boring investment, meaning that they have a predictable revenue stream, relatively predictable costs, the costs are falling, it’s more stable.
“In contrast, it’s the oil and gas industry that’s become volatile and unstable and high-risk.”