Oil stocks destroy clean energy in 2021 after years of delay

Over the past two years, shares of electric vehicles and emerging renewable technologies have skyrocketed as investors factored in the transition from fossil fuels, but so far in 2021 that narrative has turned around.

In numbers : XOP, an ETF that tracks America’s biggest oil and gas companies, has gained nearly 40% so far this year, as oil producers like Diamondback Energy and Occidental Petroleum have seen their shares jump more than 50%.

  • The energy sector of the S&P 500 was by far the best performing of the 11 sectors in the index (generating 15 percentage points better performance for investors this year than the second best sector, financials).
  • Diesel, crude oil and gasoline were the world’s top performing major assets in 2021, each gaining more than 25%.

On another side: Clean energy has suffered, led by the swoon of 2020 global stock, Tesla, which fell into “bear market” territory after falling 20.6% from its last record on Jan. 8.

  • The decline in renewable energy names has been widespread, with companies as diverse as Chinese electric vehicle maker Nio, California battery maker Romeo Power, hydrogen-powered utility company Plug Power, and electric semi-trailer maker Hyliion. Holdings all recorded sharp declines.

What they say : UBS Global Wealth Management CIO Mark Haefele recommends “investors with a high risk appetite… seek direct exposure to oil,” even as crude prices peak in a year.

  • “As border closures and quarantine measures are relaxed, this should release pent-up demand for vacation travel and other types of recreational activities, increasing the demand for oil,” he said in a statement. customer note.
  • He expects global oil demand to reach 100 million barrels per day in the second half of the year, nearly tying the world record of 102 million barrels per day.

Alternatively: “Given their aggressive discounting to the present long-term cash flow, they suffer from the same effects as investment grade corporate bonds and anything that pushes cash flow far into the future,” Bespoke Investment said. Group in an article published on Monday.

The big picture: Tech companies have generally seen a decline so far in February, but renewable energy companies have done much worse. The ICLN is down 7.1% this year, while the Nasdaq Composite is up 4.5% and the Nasdaq 100 is up 2.4%

The last word: The 2021 malaise comes despite good news for the industry at the dawn of the year: President Biden expected to increase investment in renewables in the United States, oil prices rise, and early sales estimates Global electric vehicles in 2020 jumped to more than 3 million, reaching a market share of 4.4% – nearly double the 2.5% share of 2019.


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Felix J. Dixon