David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    Email of the day on a third industrial revolution, doing more with less and a nuclear revival from David Brown:

    It was a memorable 3 days with you last week. It gave us time to discuss several things in depth, including our new industrial revolution. Thank you for capturing some of the key points in your recent writings. I gave a lengthy presentation on our new 3rd Industrial Revolution at David Fuller's Markets Now meeting in London, February 2015, and Forbes interviewed me a few weeks later. Here is an extract from the article:

    "We clearly have the new communication system, the internet, and I suggest we can reasonably date the beginning of this industrial revolution to the mid 1990s when desktop PCs became linked for the first time by Tim Berners-Lee’s World Wide Web and Marc Andreesen’s Mosaic/ Netscape system. The internet is well ahead of the other two factors."

    This was some years before Klaus Schwab and the World Economic Forum took up the theme. And yes, I do rank it as the 3rd, not 4th as Schwab does: the development of computer tech in the 1970s-1980s hardly constituted a revolution. It did not drive a massive increase in productivity because it lacked most of the key factors required for an industrial revolution.

    Back then, we did not have the internet, the first of the 3 new factors required, and which more recently has given a massive change in communication and in distribution of information and goods. That became feasible from 1994 when Netscape appeared and especially from 2007 with the first iPhone followed by other smartphones.

    However, the other two required breakthroughs are still missing today. Our new industrial revolution has stalled with just 1 of the 3 essential factors in place. Our financial system is completely unreformed and inefficient; and we have not rolled-out a viable new energy source.

    In fact, in my opinion, the Western world has gone seriously off-track in the eight years since I first presented on this in 2015. You captured the issue very succinctly when wrote "The basic assumption is technological innovation allows us to do more with less". "The challenge in the energy and financial sectors is the solutions being proposed do less with more." The current direction of travel on renewable energy is worrying. In addition to the gross inefficiency, unreliability, and cost-ineffectiveness, of wind and solar power, we have the bizarre belief in shipping wood chips across the Atlantic to fuel 'green' energy in the UK. Apparently, returning to the energy source that pre-dated our 1st and 2nd revolutions constitutes progress!

    I do not have much idea about the new financial system, but the new energy system is obvious and that is the topic of this note to you today, Eoin. From our discussions last week, I believe you are of the same view, and it would be good to pass this on to all subscribers of Fuller Treacy Money. I recommend this article. At last we are beginning to see writing by experts in the energy sector, real experts, with factual information. This article on nuclear power will (hopefully) be followed by many more.

    Here are some key points from the article:

    The only viable and scalable low-carbon power technology is nuclear. Today, more than 400 reactors generate about 10 per cent of world electricity. They are emissions free and reliable. Their only problem is that they are perceived to be dangerous and are violently opposed by some groups.

    Dangerous, nuclear is not. Per unit of energy generated, nuclear power has proved to be much safer than any other major power generating technology. Coal, gas and hydropower are respectively 4000, 100 and 35 times more dangerous.

    In the event of an accident where all power supply is lost, all modern reactors will shut down safely. Over the last 60 years the only nuclear powerplant accident with directly measurable health consequences has been at Chernobyl. The reactor there was operated in defiance of all safety principles and used obsolete technology without shielding: its failure has no relevance to a discussion of normal nuclear reactor safety.

    Many different designs of small modular reactors which are built on a production line basis are proposed and several are now under construction. None of them can melt down and release radiation.

    A rapid switch from expensive, impractical wind and solar power to reliable nuclear is the only way of meeting the net zero goal while keeping the lights on and society in general functioning.

    Nuclear power needs to be recognised as a low emissions source of electricity that is superior to wind and solar power. Subsidies, mandates and other enormously expensive policies intended to promote wind and solar power must be abandoned and the money switched to expediting nuclear power.

    Governments need to face the fact that wind and solar power can never deliver their net zero dreams of low cost, reliable, emissions free electricity. They have only two realistic options: switch to nuclear power, or abandon net zero.

    The article is referring to current fission technology, and - as you mentioned recently - we may soon have even more powerful and efficient fusion energy to follow.

    I am hoping that we are past peak nonsense about so-called 'green technologies' and that realism will begin to reassert itself. Eoin, it would be good if you can periodically update us on investment themes related to nuclear power. And let's return to the topic of what might constitute "doing more with less" in a much-needed new financial system.

    Thanks and best wishes to Aisling and family. It truly was wonderful to host you last week.

    Read entire article

    Colombian President Says No One is Above the Law as Son Charged

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Colombian President Gustavo Petro said that an investigation into whether his son took money from organized crime must be allowed to follow its course, since “no one can be above the law.” 

    A prosecutor said Thursday that Petro’s eldest son Nicolás put some of the tainted money to his father’s successful 2022 campaign and kept some of it for himself. 

    Gustavo Petro, center, waves to supporters alongside his son Nicolas Petro Burgos, right, on election night in Bogota, Colombia, on May 29, 2022.

    The scandal is likely to further weaken the leftist government’s ability to pass its radical health, pension and labor reforms, and may also hurt its performance in upcoming regional elections in October. 

    “The Petro administration lost a lot of leverage with this,” said Sergio Guzman, the director of Colombia Risk Analysis, a Bogota-based consultancy. “It was going to have a difficult time to move things through in congress, but this makes it all the more difficult.”

    Even so, people who think Petro is now finished are “jumping the gun”, Guzman said. 

    Investors often welcome developments that hinder Petro’s welfare reforms, fearing these will blow out the fiscal deficit. The peso was 1.9% stronger at 10.40 a.m. in Bogota, the best performance in emerging markets. 

    Read entire article

    Saudis Extend 1 Million-Barrel Oil Cut, Say Can Be Deepened

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Saudi Arabia extended its unilateral oil production cut by another month, and said it could be prolonged further or even deepened. 

    The leader of the Organization of Petroleum Exporting Countries will continue the cutback of 1 million barrels a day — launched last month — into September, according to a statement on state Saudi Press Agency. That will hold output at about 9 million barrels a day, the lowest level in several years. Crude futures jumped. 

    The measure — which comes on top of supply curbs Riyadh was already making with others in the OPEC+ producers group — is intended “to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets.” Its ally Russia also said it will extend its export curbs, but taper them slightly.

    Read entire article

    Baseball-Size Hail Makes Insuring Solar and Wind Farms Pricier

    This article from Bloomberg may be of interest. Here is a section:

    Solar plants and wind farms are crucial weapons in the battle against greenhouse gas emissions. So it’s a cruel irony that their effectiveness is often hobbled by damage from storms, floods, wildfires and other disasters amplified by global warming. That’s making them harder to insure. Property insurance premiums for US solar facilities have soared as much as 50% over the past year, threatening to slow their rollout and derail global efforts to cut carbon emissions.

    Read entire article

    Oil Rallies to $80 as US Economic Growth Improves Demand Outlook

    This article from Bloomberg may be of interest. Here is a section:

    Oil rose to the highest since April as signs of economic strength in the US improved the outlook for demand, outweighing concerns about a price correction based on technical factors.

    West Texas Intermediate settled above $80 a barrel as US economic growth exceeded expectations and speculation mounted that the Federal Reserve is nearing the end of its monetary tightening cycle. But crude is trading in overbought territory on its relative strength index for a third day, raising the threat of a pullback. 

    “Crude extending the bullish rally, led by ‘risk back on’ sentiment in the equity markets, is keeping the buyers present in the crude space,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities. Yet “the market has gone up too far, too fast with speculative buying, and that is creating the overbought condition, so we should see some erratic corrections soon.”

    Read entire article

    String of Global Heat Records Raises Alarm on Climate Change

    This article may be of interest. Here is a section:

    Heat this summer has already put millions of people around the world at risk. China is experiencing a scorching new heat wave less than two weeks after temperatures broke records in Beijing. Extreme temperatures in India last month have been linked to deaths in some of its poorest regions, while last week saw a dangerous heat dome cover Texas and northern Mexico.

    The extreme weather may put more pressure on global leaders to curb greenhouse gas emissions generated from burning coal, oil and natural gas that trap heat in the atmosphere. The effects of climate change are being exacerbated by the arrival of the first El Niño in almost four years.

    It’s likely the world will exceed 1.5C of warming “in the near term,” with efforts on climate action still insufficient, the United Nations’ Intergovernmental Panel on Climate Change said in March in a report summarizing five years of its own research. Global greenhouse gas emissions need to be cut to 60% below 2019 levels by 2035, according to the report, and climate-related risks are rising with every increment of warming.

    Read entire article

    Petrobras Switches From Asset Seller to Buyer as Debt Slumps

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “Petrobras has solid financial metrics, and took advantage of a market liquidity window,” Moody’s senior analyst Carolina Chimenti said in an interview. “So far there’s been no drastic change in its financial strategy.” 

    While the yield on the firm’s latest bond is above its weighted average rate, there are several US-dollar transactions that were first priced at more expensive terms, according to data compiled by Bloomberg. For instance, the firm has over $710 million of 7.375% bonds due in 2027, which was first priced at par. The securities are quoted at about 104 cents on the dollar.

    “With this resource we’ll improve the profile, paying debts that have a higher rate” said Leite, without disclosing the specific securities that could be included in a transaction which may happen later this year. 

    The CFO expects investors to be more optimistic about Brazil in the short-term. Talks with bankers suggest the accounting scandal that toppled Brazilian retailer Americanas SA was restricted to the segment, Leite said. “They thought it would be a gunpowder fuse, but it was just a match.”

    Read entire article

    The Giant Grid Bottleneck Threatening Climate Goals

    This article may be of interest. Here is a section:

    2. What will that entail?
    It means building grids dense enough to absorb these renewable sources while still achieving the stable frequency that’s vital for the smooth functioning of electrical equipment and electronics. It will also require more high-voltage lines to carry surpluses from regions where the sun is shining and the wind blowing to meet demand elsewhere. Right now, the lack of long-distance transmission means a lot of recently installed renewable capacity is going to waste. BNEF estimates it will cost around $21.4 trillion to adapt grids to a net zero world and require 152 million kilometers of new cables — enough to stretch from Earth to the Sun if laid end to end. That implies a surge in consumption of copper — more than the mining industry can currently supply. But the biggest obstacle to grid development right now isn’t sourcing the materials or finding the money to pay for it all. 

    3. What’s the hold-up?  
    Local communities often oppose new wind farms, solar arrays and power lines and projects can face years of consultations involving multiple stakeholders. State regulators impose detailed technical studies and other bureaucratic hurdles. There are almost 1,000 gigawatts of solar projects stuck in the interconnection queue across the US and Europe, close to four times the amount of new solar capacity installed around the world in 2022. If all the wind and solar projects stuck in limbo were completed and connected to the grid, they’d add up to more than the present electricity generation capacity of the US. 

    Read entire article

    Prigozhin Says He Didn't Plan to Overthrow Russian Government

    This article from Bloomberg may be of interest. Here is a section:  

    Wagner mercenary group chief Yevgeny Prigozhin released an audio recording in which he discussed the past weekend’s events and said his group didn’t plan to overthrow the Russian government.

    March toward Moscow showed serious security problems in the country, he said in a recording released on Telegram that didn’t specify from where he was speaking.

    Prigozhin said he launched march because he wanted to preserve Wagner as a military group and not come under the command of the Defense Ministry.

    Belarusian President Alexander Lukashenko helped find a negotiated solution to the weekend’s events, he confirms.

    Belarusian President Alexander Lukashenko earlier brokered a deal in which Prigozhin ended the revolt in return for Putin letting him travel to Belarus and dropping criminal mutiny charges, the Kremlin earlier said.

    Read entire article