Soaring oil prices could push clean energy faster

Oil prices have hit over $ 80 a barrel and a seven-year high, and with economies going through a pandemic recovery and much of the Northern Hemisphere already facing spikes in natural gas prices, this could be a disaster for the economies, reports the Financial Times.

The Biden administration, which has strongly opposed oil dependency, recently tried to push for more oil production as shortages drive up prices. The administration is allegedly considering releasing crude oil from its strategic stocks to help drive prices down, even temporarily.

Rising oil prices have raised concerns with some that it puts the world in triple-digit territory with prices not seen since the 2008 global financial crisis, when oil was close to $ 150. the barrel. While some see it as a final push before the clean energy transition begins to take hold, other analysts see it as an alarming concern.

The world needs to prepare for “triple-digit oil prices,” said Wil VanLoh, director of Quantum Energy Partners, one of America’s largest oil-focused private equity firms. “It will cripple Western economies financially.”

Most analysts and industry experts believe the oil industry‘s problems are just too big for a single price hike to fix anything, and the shift to out-of-the-box energy sources and practices. low emissions will naturally overwhelm the industry in the long run. In the short term, however, the world could be in trouble.

One benefit of soaring oil prices is the attention and sense of urgency it could bring to the transition to renewables from reliance on fossil fuels.

This is something that “will lead to a rethinking of priorities, investments and timing,” said Daniel Yergin, vice chairman of the board at IHS Markit. “It puts energy security and reliability back on the same agenda as the energy transition. “

SPYX invests with reduced exposure to fossil fuels

Investors looking to reduce their exposure to fossil fuels in their investments should look to the SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX). Investing is a core allocation to large cap stocks in the S&P 500, except with very small carbon footprints.

The fund tracks the S&P 500 Fossil Fuel Free Index, a benchmark of S&P 500 companies that are “fossil fuel-free”, defined as companies that do not have fossil fuel reserves (thermal coal reserves and under- products of coal reserves, as well as oil or gas reserves).

It is not the same as being without all the stocks of oil. The fund still has minor allocations to fossil fuel companies including Valero (VLO) and Halliburton (HAL). But without exposure to companies that actually own the physical reserves of oil, coal, or gas, the fund’s energy allocation is drastically reduced. Energy only represents 0.76% of the sector composition of the ETF, compared to 2.82% of the SPDR S&P 500 ETF Trust (SPY).

SPYX’s main sector allocations include Information Technology at 28.59%, Consumer Discretionary at 13.31% and Healthcare at 13.26%.

SPYX has an expense ratio of 0.20%.
Source: ETF Trends


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Felix J. Dixon

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