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As America’s business turns to renewable power, major oil companies want to grab more of that action. European oil companies such as British Petroleum and Royal Dutch Shell are building wind and power projects. They also are striking deals to supply electricity to big corporate buyers such as Amazon and Microsoft by broadening their domain into traditional power projects.
The moves come as more businesses look to limit their carbon emissions. More companies bought a record amount of renewable power last year and even more this year. Historically, power supply has been regional, with utilities generating and providing electricity to homes and businesses in their specific area of interest.
Oil executives claim their global reach gives them additional supply power not available to regional specialists. Major oil producers know that now is the time to pursue such capabilities as the power supply changes may come faster than expected.
Exxon Mobil Corp and Chevron Corp haven’t entered the business yet. They are slow to diverge into green electricity due to their lifelong identity with oil. European companies such as the major Shell corporations are confronting the inevitable.
France’s Total agreed to supply solar power to U.S. drugmaker Merck Co. Shell agreed to provide Amazon, the world’s largest corporate buyer of renewable energy; Amazon plans to power its entire operation with renewable energy by 2024.
All these examples point to a realization by all oil companies, big or small, that urgent changes must be made or total disintegration may be the ultimate result. It is very likely that the great U.S. oil production objectives such as fracking will come to naught, given another decade or two at the most.
Clean air may be only an empty wish for now, but it may well be an urgent necessity by 2050, at the very latest. Whether the energy giants like this or not, the tidal waves of future reality will be the ultimate judge of redemption — or bankruptcy.
Since the activating of inflation has not been a factor recently, this danger to a smooth economy has not been an active source of discussion.
Heavily supported by the Federal Reserve and its dynamic boss, Jerome Powell, the incredible printing of new money staved off galloping high prices, usually attendant upon demand exceeding supply.
However, by holding off the inevitable, the upcoming inflation could be fiercer as limited supply meets the hungry wolves of demand that have been waiting to burst out as the COVID-19 pandemic comes under control. This waiting period was worse because of the lack of labor waiting on the sidelines.
The latter has been supported by government stimulus awarded to those waiting, but not ready now, to get back to work. Therefore, unemployment is relatively low, with demand coming on like gangbusters.
While the demand factor has been pressuring higher prices faster than usual, much of the labor supply usually looking for jobs hasn’t occurred.
The unusual demand for new housing complicates this transition even more. Worse is the threat of major new taxes being pushed by President Joe Biden, much of which are likely to happen.
The demand breakout, usually expected after a lengthy drought, will likely be even more dynamic than ever as normal, timely demand is engendered by the thousands of end-use products that had been unmovable for the past few years.
Is ‘Hot’ Recovery Generating Investment Surge?
In the early first quarter of 2021, an unexpected stock market surge was belling heavily on a major recovery from the original “crash” that took place more than a year ago.
Led by more than two dozen actively managed exchange-traded funds, these have jumped at least 20 percent so far this year, outpacing the Standard and Poor 500's 12 percent climb. Goldman Sachs’ analysts say 56 percent of stock pickers say large-caps are beating their benchmarks, the highest percentage in more than a decade.
Some of the best performers include companies with smaller market capitalizations. Also, value stocks — those deemed inexpensive relative to measures of a company’s net worth — are doing well.
These moves mark a reversal of last year’s trend when the pandemic slowed economic activity and stock pickers flooded into shares of technology companies expected to benefit from the future. New business activity is expected to surge to its highest level in at least four decades. This is driving investors toward shares of manufacturing energy companies and those tied to economic growth.
National banks, including Wells Fargo and Chase Manhattan, believe the economy will continue accelerating, which is bound to generate greater borrowing amounts. The Federal Reserve’s “big book” report on regional economies keeps close tabs on their unemployment numbers.
This bank optimism is additionally intensified for value stock and smaller-cap names. There are risks, however, in highly valued stocks, such as volatile energy. This becomes even riskier as higher oil and natural gas prices are at crosshairs with President Biden’s focus on clean air.
The current higher energy prices for oil and natural gas are climbing quickly on the verge of 2021's second half. Some analysts say a crash of demand for oil this summer could push prices even higher. It calls for intense borrowing from banks, making even the exchange-traded friends a future target at a time of reversal later in the year.
A possible future crash would be even more telling as they jump from such an investment skyscraper to dramatically end the current upward trend.