In Europe, government officials are telling people to cut power usage or risk blackouts.
In the US, Biden is draining more oil from the nation’s strategic reserve to curb fuel prices.
And in Australia, the Victorian Labor government has pledged to re-nationalise the energy market if reelected…
Everywhere you look, energy continues to dominate the discussion. Every major Western economy is grappling with energy supply or pricing issues in some way, shape, or form.
Make no mistake about it, we’re in the midst of a major turning point.
The optimists among us, myself included, will tell you that this is a chance to change things for the better. I honestly believe that this crisis was a wake-up call for a lot of the world. It has perfectly showcased the importance of localised energy security for every nation on Earth.
For that reason, I expect we’ll see a lot more focus on nationalised energy production.
As for whether it will speed up the transition to renewables and non-fossil fuel alternatives, that is harder to tell. Logic suggests that it should but getting to net-zero emissions isn’t really an argument over logic — it’s an argument over feasibility.
This is precisely why Dan Andrews’ new energy proposal has plenty of people worried…
Back to the Dark Ages
As the Victorian premier explained yesterday, he plans to revive the State Electricity Commission (SEC). This government-owned body would receive $1 billion to invest in new renewable energy production that would then be sold to consumers.
In other words, the state government is planning to reverse decades of free-market initiatives to try and ‘fix’ rising energy prices and emissions. They clearly seem to believe that they can waltz in, invest a bunch of money in renewables, and push fossil fuels out of our energy mix.
Again, that sounds great in theory, but will it work in practice?
I have a hard time believing that major energy companies wouldn’t be doing the same thing if it were that easy. Despite what the premier seems to think, this endeavour is not going to be cheap or quick. That’s what makes this plan so concerning.
If the government ploughs ahead without proper planning, this could blow up in their face. And that would be fine if it weren’t for the fact that every Victorian could pay the price. After all, if they go too hard, too fast on this renewable plan and push out fossil fuels too quickly, it could be a very pricey transition.
We’re already seeing what happens when you underappreciate oil and gas. You just need to look at Europe for a glimpse of our potential future — a future that has impossibly high petrol prices, energy rationing, and the threat of blackouts…
If we don’t get this transition right, we could end up sending ourselves back to the Dark Ages — a far cry from the renewable utopia that many hope to see.
Personally, I really do see renewables and low-carbon energy sources as the future for our world. But I don’t think we get there with rigid government intervention and dismantling free-market mechanisms.
History shows us that you can’t force change, no matter how much politicians may want it.
Long term, it will only end up hurting all of us. Short term, though, it could really put some pain on investors.
After all, the energy companies that the SEC will be trying to replace have shareholders. And those shareholders are everyday people like you and me that often rely on these investments to preserve wealth.
And that is exactly why you should be worried about Dan Andrews’ new plan.
The energy endgame
This great big energy mess then begs one big question…
What is the solution?
Honestly, I wish I had a simple solution for you. But the fact of the matter is there probably isn’t a simple one.
Reducing emissions and keeping the lights on is going to be a balancing act that will likely take decades to resolve. Barring any truly revolutionary energy breakthroughs, it will likely just take a lot of time and money.
For investors, that could and should present a lot of exciting long-term opportunities. That is, if the global governments leave the markets to do what they do best…
Because of this possibility, in the short term, there are some more contrarian possibilities to consider. Possibilities that our own Editorial Director, Greg Canavan, has been investigating for some time now.
That’s why, next week, Greg plans to lay out his vision for energy over the next two years.
I can tell you now that it is a pretty confronting outlook, but one that is important to consider. Because no matter where your opinions lie along the spectrum of the energy debate, you must consider the facts that lie before us.
So keep an eye out next week for more updates on Greg’s energy overview. Because if you’re an investor in any sort of energy solution, you’ll want to hear what he has to say…
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
