Climate Change Backlash: Oil, Gas Investments Raking in Cash Hedge fund CEO Josh Young is forthright about how he cashed in on climate change activists’ hate for fossil fuels.
“People don’t understand how much money you can make in things that people hate,” Young said in a Financial Times article focused on hedge funds that are profiting on energy equities, including his Bison Interests investment company that reports say saw a more than 300 percent increase in value in 2021.
“What I’ve been doing is owning the things that people absolutely hate,” Young told News, referring to the war on fossil fuels, including the Biden administration’s efforts through executive order to shut down U.S. pipelines and halt exploration and production of oil and gas on federal lands.
Young explained the lucrative investments in energy equities that are being dumped by businesses, universities and other entities in the name of climate change and social justice.
“There’s still so much value for so little money [in oil and gas] versus what is available in the broader stock market or for other investments,” Young said.
Bison Interests website explains the company’s investment strategy this way:
We are leading experts in the oil and gas investment field, and we concentrate on dislocations in the marketplace. Headquartered in Houston, Texas, the heart of the U.S. energy market, our strategy is focused on outperforming in the public oil and gas space, over a variety of market conditions.
News asked Young about on how the climate change movement has put the focus on institutions and corporation’s environmental, social and corporate governance, or ESG rating, leading to divestment from fossil fuels across the board while the demand for oil and gas here and abroad continues to grow.
“Institutional divestment by pension funds, endowments, some billionaires, and others have depleted capital that would have been spent on development, leading to lower production than otherwise,” Young said. “Divestment and associated negative media narrative has suppressed the valuation of public companies and assets by depleting available funds to buy or hold these stocks, with valuations much lower than when oil and gas prices were last at these levels.”
“For example, oil is at levels last seen in 2014, but the XOP oil and gas producer ETF is down 50 percent,” Young said.
And the phenomenon that Young has taken advantage of will continue, according to a Bison Interests report:
2022 is looking promising for the oil and gas industry on several fronts. Un-economic “ESG” mandates by investment allocators and increasingly unfriendly policy and regulations are restricting the availability of capital and suppressing development activity. Insufficient exploration and production activity is depleting reserves. And despite the prevailing “green transition” narrative, demand continues to rise inexorably. Ironically, divestment and virtue signalling policymaking has intensified at a time where an energy crisis of epic proportions is already well underway, with natural gas prices in Europe sitting near $200 / barrel of oil equivalent after briefly running higher than $350!
But, Young told News, the ongoing and growing demand for oil and gas is not exclusively beneficial to investors.
“Reduced domestic oil and gas production raises prices and increases the risk of supply disruption, which could lead to lines at gas stations (already seen recently in Europe!), blackouts and shortages,” Young said. “Investing in domestic production helps moderate prices and reduces both the risk of shortages and dependence on sources in countries that may have adverse interests to the U.S.”
Perhaps just as ironic, Young believes in the importance of protecting the environment while supporting fossil fuels, which have lifted millions of people around the planet out of poverty and improved the standard of living overall.
“I don’t like to invest in companies that are egregious polluters, such as producers in Russia responsible for numerous oil spills,” Young said. “It is not necessary to cause this sort of environmental destruction and it is bad business.”
“It is possible to sufficiently supply the energy necessary for humanity to thrive without destroying the environment,” Young said.
“I focus on high Energy Return on Investment (ERI) projects, which are intrinsically better for the environment, when measured holistically, than low EROI projects,” Young said. “So the projects I’m involved with are actually improving the environmental footprint of the energy supply.”
“Increases in energy demand are correlated with lifting people out of poverty, extending their lifespans significantly, and reducing disease and hunger,” Young told News. “So I believe these investments are both holistically environmentally beneficial and also are humanitarian.”
And Young predicts that not only are fossil fuels on the move but that the public’s opinion on them will shift away from saving the planet to saving the American middle class lifestyle.
“So in certain places, in Europe, it’s already kind of having a resurgence and you’re seeing it a little bit in certain European reporting,” Young said. “I think it just takes shortages and gas lines and other things. And then these things get more popular.”
And even with all the climate change hysteria and Biden’s efforts to kill fossil fuels, according to the federal Energy Information Administration the oil and gas sector grew in 2021, including the completion of 14 pipelines in the United States.
“I’ve been told for years that oil and gas are ‘going away’ and yet oil demand has increased by at least 1 million barrels per day worldwide for the last 40 years, with the exception of the financial crisis in 2008 and the world shutdown for Covid in 2020,” Young said. “And oil and gas companies and assets are still being priced as if they are ‘going away’ despite continued growing demand.”
As for Young and his oil and gas investment strategy, he will continue to take advantage of the unintended consequence of climate change activists demonizing fossil fuels.
“It’s like a half-off sale, essentially, for oil and gas stocks,” Young said.