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Just because of the wind: oil stocks versus green energy stocks - Walla! Of money

2022-07-07T04:59:54.366Z

Just two years ago, oil companies were willing to pay whoever would take a barrel from them, while non-polluting energy stocks flew into the sky. Then came the corona restrictions and the demand for proud oil



Just because of the wind: oil stocks versus green energy stocks

Just two years ago oil companies were willing to pay whoever would take a barrel from them, while non-polluting energy stocks flew into the sky.

Then came the corona restrictions, the proud demand for oil and to all this was added the Russian invasion of Ukraine.

Is this a knockout of the traditional green energy?

In the fast term, yes

Roast Greenberg

07/07/2022

Thursday, 07 July 2022, 07:36 Updated: 07:53

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Who remembers that just two years ago all we wanted was to save the planet? (Photo: ShutterStock)

The oil comeback following a return to life: Everyone who enters to refuel their car in the last month experiences an increase in oil prices, when you refuel your car at a price of NIS 8.29 (full service price) per liter of 95 gasoline



. Queen and began to spark a discourse on humanity’s impact on the blue ball, which led, among other things, to a sharp rise in renewable energy stocks and a dizzying drop in oil company stocks, especially after in April 2020 the price of oil closed at $ 37.



This is compared to a price of about $ 102 at the beginning of the trading day on July 6, and of about $ 130 during last March.

The reason for the negative price then, was the necessity for continued oil production which increased supply, as the closures prevented most travel, flights and boating, thus significantly reducing demand.

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Traditional energy stocks versus green (Photo: Walla !, no)

The main beneficiaries of the fall in oil stocks were wind energy stocks, which focused on Western Europe and the northern United States. , And about



43.2

% of the total electricity production of the types of renewable energy that operate in it.

Accounted for only about 11.4% of the total energy produced by the U.S. renewable energy power plants by 2020.



Rises in the share prices of renewable energy companies and the funds raised as a result, however, did not meet energy needs, And it's time for gas and oil companies to start celebrating.



About two years ago they were still willing to pay for someone to take barrels from them, and now it is possible that the price of oil will triple itself, given the possibility that Russia will cut oil production as part of its attempt to harm the West.



Russia-Ukraine-Ukraine also plunged Germany, Europe's largest and most powerful industry, into an energy crisis, prompting it to consider passing a law to nationalize energy companies and domestic gas rationing, a serious doubt and a wink to local companies to cooperate with the administration.



All this has led to an even sharper rise in the shares of oil and gas companies and to a deepening decline in the shares of renewable energy companies, and the wind in particular.



For example, the American oil and gas company Exxon Mobil, which is traded on the New York Stock Exchange worth about $ 367 billion, has jumped by about 43% since the beginning of the year, and by about 25.46% compared to the end of 2019. While the Danish wind energy company Vestas Wind System Wind System) has fallen about 22.5% since the beginning of 2022, but still maintains an increase of about 14% compared to the share price at the end of 2019.

Guy Rosen, Overseas Desk Manager at Migdal Investment Portfolio Management (Photo: None)

Guy Rosen, Overseas Desk Manager at Investment Portfolio Management Tower

: “In 2021 there has been a sharp change of direction in the performance of both industries.

The economy gradually returned to normal activity, inflation began to lift its head and oil prices ran back up.



All of these have led to strong performance by companies in the fields of commodities in general, and oil in particular.

On the other hand, the market has realized that the era of cheap and easy money is coming to an end, and interest rates are going to rise much sooner than expected in times of crisis.



Hence, the pricing of growth companies, most of whose value is based on long-term future profits, has become much more conservative and the appetite of investors for these companies has declined.

Among them are renewable energy companies.



This is mainly because while inflation is rising and interest rates are rising, investors prefer to hold on to traditional and liquid value-added companies rather than small companies with low profitability at present, and in many cases no profitability at all.

Most green energy companies fall into exactly this category, and so while the entire market has risen, most have fallen, and sharply.



The negative momentum towards growth companies has continued even more since the beginning of 2022, due to the macro picture of interest rates and inflation.

On the other hand, the war between Russia and Ukraine had positive consequences for the traditional energy sector, with corona shares declining sharply following the decline in demand for oil and an unprecedented collapse in its price, which deepened the sharp declines in the sector's shares.



But keep in mind that the environmental trend has been gaining popularity for several years, both in the investment world and among policymakers around the world.

Energy efficiency from renewable sources, such as wind and solar, is improving technologically and becoming less dependent on government subsidies than in the past.



Also, the need to stimulate the economy in the corona crisis has led to the launch of extensive fiscal programs by many countries amounting to hundreds of billions of dollars in the field of renewable energies.



In addition, the sharp rise, by hundreds of percent, in gas prices in Europe has greatly improved the relative pricing of energy production from renewable sources compared to traditional gas production.

And even if the Russia-Ukraine war ends soon, it is likely that Russia's gas and oil supplies to Europe will not return to pre - crisis levels.



The Western world in general, and Europe in particular, understand the necessity of achieving energy independence and independence from Russia and other non-Western countries.

As a result, Europeans began to further accelerate investment in green energy in order to approach this independence and increase the rate of electricity generation from renewable sources at the expense of gas and coal.



Therefore, renewable energy stocks have fallen more moderately this year than other major market indices, especially against other growth industries that have fallen more significantly.



Later in the year we expect a moderation in inflation and a slowdown in oil and commodity demand due to a significant economic slowdown, and perhaps even a recession, in places like Europe and the US, and that the impressive excess return of oil and energy companies over the past year has exhausted itself.



Investors' appetite for niche companies will continue to be low in this challenging environment, and it is therefore difficult to expect an excess return from green energy companies in the near future.

In the longer term, however, the point at which they are located can be an interesting entry point, after an in-depth examination. "

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Source: walla

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