February 16, 2022
Some things are just funny. Like catching an Amazon porch pirate in the act, or seeing the high school bully broken down on the side of the road.
What is even funnier are the energy policies shoved down the consumer’s throats and investment practiced by Environment, Social, and Governance (ESG) focused groups in California. Let’s start with the energy policies in California born over 30 years ago with the best of intentions of protecting the environment. But we are now seeing the unintentional (and in some cases intentional) consequences of bad energy policies.
So looking at the EIA energy map below, you could see that there is only one coal-fired and one nuclear source of electricity. Natural Gas and Hydroelectric are the most prevalent, with solar coming in third. So at first blush, you think, wow what a great job California! Only one coal plant, lots of renewable energy.
1: So why is California displacing about the same CO2 as 10 years ago? The energy sources may have changed, but Californians are using more materials for building roads, renewable infrastructure, and the stalling migration to EV transportation are all important factors. An estimated 30% of EV car owners are migrating back to fossil fuel vehicles.
2: Why is California using just about as much coal as they were? Coal usage has switched to coking coal because of the significant steel and cement needed in building projects and renewable infrastructure projects. Coking coal burns hotter for steel and cement manufacturing while producing more CO2.
3: Why are California’s electricity costs to consumers the top 3 most expensive in the United States right behind Hawaii and Massachusetts? Countries and states that rely on renewable power without a proper plan to migrate away from fossil fuels have the highest energy prices. The top three states have significant renewable installations and rely on tax incentives and government funding. Germany is also facing these same issues in its energy and financial crisis. Renewable energy without a plan is a proven formula for energy and financial crisis.
The chart below shows the air pollution levels in perspective: China and the US. Top air pollution cities compared in each country. California has 8 of the top 9 polluted cities in the United States. If they have so much renewable, why is their air so bad?
Environmental Investing And The Hypocrisy
Political leaders and environmentalists have stopped pipelines and even shut down natural gas and oil fields in California. But what they don’t tell you is that California is importing over 70% of the oil produced in the tropical rainforest in South America produced by Chinese companies.
The Hill published: “There is no other region in the world consuming more oil from the Amazon than California,” the report reads. Several major companies including American Airlines, COSTCO, Amazon.com, Fedez, UPS, Pepsi, Albertsons, and Kroger are connected to oil drilling in the Amazon via the California supply chain, the report argues.
Los Angeles International Airport uses a huge amount of oil from the Amazon rainforest as well, the report adds, more than any other airport in the country. The report notes that one out of every six gallons of jet fuel pumped at LAX is made from refined oil drilled in the Amazon.”
So not using oil and gas from United States operators and buying from China and destroying the rainforest is ok? The U.S. operators are held to standards that are very stringent and have less impact on the environment than Russian or Chinese operating companies.
Now let’s look at the investment craze of the ESG investment groups. The environmentalist watchdog groups have been successful in directing the big oil companies to migrate to “Energy” companies and focus on renewables. That all went out the door when oil approaches $95 because they are all posting huge returns and profits. With those huge returns to investors, greed sets in and they do not mind investing in oil and gas companies. Hypocrisy has a price and it’s at $100 oil.
The world has realized that the only way to get to Carbon Net-Zero is to work together and have a plan. COP26 announced that nuclear and natural gas are considered critical to the environmental movement to net-zero and are available to receive renewable funding and be designated in the renewable infrastructure projects. With these new designations, the concerned ESG investors can breathe a sigh of relief as they can invest in energy that will have a place on the road to Carbon Net-Zero.
Having oil and gas being produced in the U.S. following good energy regulations will help the environment, allow for people to enjoy good returns on their investments, and take advantage of tax burden reductions. Let’s get on the road to Carbon Net-Zero together.
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Jay R. Young, CEO, King Operating
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