We own several investments in oil and natural gas. I have received inquiries from readers questioning the morality of these investments. In this essay, I address their concerns.
The Church of Climate and the Law of Unintended Consequences
Over the last decade, the global warming discussion has ceased to be a scientific debate and has morphed into something far more rigid: a religion.
You are no longer asked to theorize, debate, and understand; you are asked to believe. This, by definition, is faith, not science. The dogma is strict: you are either a believer or you are a heretic. If you don’t think this has become a religious movement, ask yourself: would people who are utterly convinced that this is a man-made crisis change their minds with the emergence of new, contradictory evidence?
If you are appalled by this phrasing and that I did not immediately signal my virtue in the opening sentence, you are probably already canceling me in your mind.
But please stick with me.
I am an analyst by trade. I look at data for a living. Becoming dogmatic and religious about the non-spiritual world is dangerous in my profession. And when it comes to man-made climate change, I have seen arguments for and against. I question the data quality, the modeling, and most importantly the incentives and groupthink of the people presenting both sides.
My view on this topic is simple and, I hope, intellectually honest: I simply don’t know. Climate is a complex system where the interrelationships among variables are very difficult to assess. Thus, the only rational stance I can take is Socratic ignorance. Even this stance is already getting me canceled by believers and non-believers.
I have a personal rule: I don’t debate religion or politics. I have never seen a person change their mind on these topics during a debate, and life is simply too short for futile arguments. Thus, here I’ll take a more pragmatic approach: It is rational to apply a “margin of safety” and err on the side of assuming global warming is man-caused and real. But, as investors and rational thinkers, we must also weigh the efficacy of our efforts against their costs.
As Milton Friedman famously said, policies should be judged not by their intentions—not by how warm and fuzzy they make you feel during a stump speech—but by their results.
The Road to Hell (Is Paved with Green Intentions)
If we carefully observe how the world has dealt with global warming, we would quickly realize we have failed miserably. The fight against global warming follows a familiar, depressing trajectory (especially when the government gets involved): it started as an idea, mutated into a movement, and ended up as a racket.
We have spent trillions of dollars, and what do we have to show for it?
Take Germany. In one of the most irrational policy moves I have ever witnessed, Germany shut down its nuclear power plants—the only reliable source of carbon-free baseload power.
Instead, this northern country decided to rely on solar and wind. But here is the problem with physics: the sun doesn’t always shine, and the wind doesn’t always blow. To bridge the gap, Germany has to run “peaker” (natural gas-powered) plants that are extremely inefficient and spew CO2.
But it gets worse. To fuel this transition, Germany got hooked on cheap Russian natural gas. In fairness, Germany originally embarked on its “green” journey after the Fukushima disaster, when it vilified nuclear energy. But the height of this insanity occurred in April 2023, when Germany shut down its very last nuclear plants—more than a year after Russia invaded Ukraine—while the country was in the midst of an energy crisis.
Germany used to be a manufacturing powerhouse, famous for chemicals and automobiles. Both industries require cheap, reliable energy. Germany doesn’t have that anymore.
The UK is following a similar script. In its quest to turn green, North Sea gas production has declined roughly two-thirds since its 1999 peak. Windfall taxes have crushed investment. The result? The UK pays roughly four times as much for commercial electricity as the US, and its manufacturing base is shrinking.
Europe’s CO2 emissions have flatlined, but not because the continent became more efficient. It is primarily because they exported their emissions. They shipped CO2-producing industries (and the jobs that came with them) to China. Consequently, China’s emissions tripled between 2000 and 2023. This is accounting sleight-of-hand, not planetary salvation—we still share the same planet.
The US has spent trillions on green energy: taxpayer-funded companies that went belly up, subsidized EVs, billions on charging infrastructure that still doesn’t exist. Yet much of what we call “green” is just as brown as the petrochemicals it replaces.
There is also the “inconvenient truth” of batteries. While renewables have low marginal costs, we currently lack the minerals to build the batteries required to store that power. And producing those batteries requires an incredible amount of energy—and CO2.
Pause for a second here and think about the real consequences of the policies. We have hollowed out our industrial base because we became uncompetitive; millions of people lost their jobs, and the quality of living, especially in Europe, has stagnated or declined, while China continued to produce what we produced with higher emissions. To China’s credit, it has been very pragmatic and is building hundreds of nuclear power plants.
The Villain Narrative
Every movement needs a nemesis. For the climate movement, it is the oil companies.
The transportation sector accounts for roughly one-third of global emissions. That is significant. Yet, we largely ignore the other two-thirds: heating, agriculture, and construction.
If we truly wanted to solve global warming, we would focus on all industries, not just “Big Evil Oil.” But nuance doesn’t sell. Instead, our policies have been exercises in virtue signaling. They enriched a select few, handed the tax bill to society, and made the West less competitive and less secure.
The Fiduciary Reality
As an investor, my role is simple—my clients hire me to protect and grow their wealth. In other words, they hire me to make them money. The ESG movement, the vilification of oil companies, and the political incorrectness of investing in them have created opportunities; energy stocks were left for dead a few years ago. We took advantage of it.
More importantly for this discussion, I am hired to make economic, not social decisions.
I do not apply my personal social filter when making investment decisions; I let my clients do that. We have a large, diverse client base with varying views on the world. The beauty of managing separate accounts is that we can customize portfolios to fit those views. Some clients tell us not to own tobacco, some have a beef with social media and tell us to never own Facebook (Meta), others have strong views on Elon Musk and ask us not to buy any Musk-related companies. Others ask us not to own oil companies. We even have clients who, due to their faith, don’t want us to own banks and liquor stocks.
We don’t judge; we just don’t buy.
We are not allergic to investing in green energy stocks; they just have to make economic and financial sense—in other words, they have to be good investments (excluding subsidies, which are subject to political football).
In the meantime, I focus on the reality of supply and demand, not the “religion” of the moment. The reality is that the world still runs on energy.
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