Black Energy - Money and Investing with Andrew Baxter

When climate change is at the forefront of public discussion, green energy is never far behind. Right now though, we have an energy crisis on our hands which has brought black energy into the spotlight. Join us this week as we dive into what’s been happening in the energy space.

Coal’s Recent News
Australia is known for its deep stores of resources, with a huge amount of coal in particular. The growing trend in Australia and amongst large Australia resources companies, however, has been to focus less on coal production as a way of going green. Host Andrew Baxter points out news coming from BHP in which they are closing down one of their premier thermal coal mines early. This particular mine is the source of high quality thermal coal which is more environmentally friendly than other sources as it burns at a higher temperature and burning it burns off a lot of pollutants. From an environmental perspective, this is great as coal produces a massive amount of carbon emissions. Pressure coming from the increased power of the Greens party following the recent election and other social pressure possibly suggests to BHP that this mine simply is not worth the negative PR. Financially, coal accounts for approximately 10% of BHP’s revenue which may not sound like a lot, but in the context of a company the size of BHP is a massive sum of money. If you pair this with the growing number of coal-fired power stations popping up in China among other places and the inevitable demand from those parts of the world, is it a chance gone begging or is it a necessity to close down the mine? IN reality, we see the demand for coal remains, and the fact is that high quality thermal coal is better for the environment and if that is not provided by BHP, then we will see an increase in brown coal being used which is far worse for the environment.

Green Energy – The Trade Off
In one of our previous podcasts we discussed lithium and our view for the future. Lithium is often touted as the great white hope for the future and the green way forward, but the reality is there are major environmental problems that have to occur before we are presented with lithium batteries. This trade off is not an issue isolated to lithium products. If we look at the hydropower space, yes it is a perfectly clean method of generating energy, but is it worth the droughts caused by ensuring there is enough water to flow through the generator? Likewise with wind power, once the turbines are up the result is totally clean energy production. The problem comes from the production of the fibreglass which is what they are made of. 

The Issues with Oil
We have covered oil prices a lot and the causes contributing to rising costs. This episode is a little bit different as we take a deeper dive into the oil business and what makes it tick. A common misconception, Host Andrew Baxter notes is that a lot of consumers assume that oil prices are arbitrary but the reality is they are more or less determined by OPEC who control the supply to the world. One of the major challenges that many do not know about is refiner margins when processing the oil from crude to usable fuel. Although this process is tricky, Host Andrew Baxter notes that no new refineries have been constructed in the US for decades with none in the pipeline for the future. Although this may seem like a good thing for the environment this means the capacity for refined oil is not growing. This is not an issue isolated to the oil industry because we see multiple countries around the world which are rich in certain commodities but opt not to invest in the space because of environmental and social pressures. It is important that companies in the fossil fuels space consider not only their impact on the environment but also the impact their decisions have on their shareholders – which is actually where their primary duty lies.