here to discuss is Michael jones chairman and Ceo of
Caravel concepts. Michael glad to have you on the
show this morning. Can you just talk to us
a little bit about how, you know, the
oil band is hitting green energy stocks and the world
or at a time where the world is reckoning with
these surging kind of oil prices. Sure, good
morning and glory to Ukraine first thought, but also
, you know, I think energy investors, investors
writ large have to think anything that they were thinking
about the energy markets three weeks ago, you just
have to throw it away because Russia's invasion of Ukraine
has changed the entire equation this week, investors are
waking up to the fact that the second largest oil
producer in the world, Russia is likely to be
banned from global markets for the foreseeable future and replacing
all that lost power is going to have to have
a renewable component. Now that means we've had a
big surge in the stock prices this week. But
even with that surge, you're only back to break
even for the S and P clean energy index.
While big oil, the traditional energy names are up
30%. You ask, why haven't they done any
better? Because the problems that had plagued clean energy
for the last year just went from bad to worse
. The problems were high input costs and their inputs
of aluminum, steel and nickel just went hyperbolic because
Russia is a big producer of all of the above
, So huge opportunity for renewables, but they're facing
some fairly significant headwinds as well, which is actually
right on point with my next question here, you
know, many are saying higher prices at the pump
. That's of course potentially going to encourage people to
adopt electric vehicles. But the challenges at the same
time, we're seeing nickel prices just so I mean
doubling the other day to the point where the LME
had to halt trading. That's of course the top
material used for electric vehicle batteries. You're also having
the chip shortage and production issues as it relates to
supply chain issues. All of that happening leading to
higher prices for electric vehicles as well. How do
you see this all playing out? So let's separate
nickel as like its own little nightmare for, for
renewable energy because I do think renewal because essentially what
we're seeing in nickel is kind of like what the
Reddit crowd did with Gamestop and some of those other
stocks where that the, the Wall Street got caught
short And there's a huge short squeeze going on because
Russia is the, it provides 20% of high quality
nickel and people are getting obliterated. That is a
short term problem that will recede with time, the
steel price increases, the aluminum price increases losing Russia
as a producer. Those are not going to fade
. You also have to recognize that the renewable energy
industry really depends upon china for major components, the
solar panels, the ni cad batteries are made in
china. Now, imagine if china participates in helping
Russia evade sanctions and gets caught up in the whole
sanctions regime, then the renewable energy space faces a
whole new set of problems. Such a good point
there. I mean that in context with the band
, just seemingly reigniting kind of this debate over the
importance of energy in you know, independence and and
really just the role renewable energy should play in all
of this. Could this moment really move the needle
towards a more sustainable future, accelerate that needle.
I would even add there beyond the short term implications
of this Russian oil ban. I would say you
have to think of this in kind of two phases
. I think the 10 year prospects for renewables just
got a whole lot better. Um, because ultimately
we, this is going to force a transition into
renewables. I also think the behavior of the providers
of energy Russia obviously just appalling. But we also
need to recognize that Saudi Arabia and US oil producers
are essentially helping the Russian war effort by not increasing
production. You had major um, C. E
. O. S of energy companies here in the
US and the Wall Street Journal in february 18th Say
basically they don't care what happens to American consumers.
If oil gets 250, they're not going to increase
production now granted that was before the invasion. But
even so that attitude and that dependence upon, you
know what we'll have to call bad actors in in
Saudi Arabia and Russia, this whole situation has elevated
those concerns? I also think it gives a buying
opportunity to biden administration and opportunity. I think right
now Wall Street is telling big oil, you take
this cash windfall and you give it to us in
dividend increases in stock buybacks. I think the Biden
administration could say, Hey, there's a war going
on and by not increasing production, you're helping the
aggressor. And what we want you to do is
we're going to force you to suspend dividend increases in
stock buybacks until you increase production 2030%. I think
that's the kind of message that would resonate really,
really well with the american people. And it would
help the 10 year period of time between now and
when we can actually make a bigger uh reliance on
the renewable energy sources. What's the re reality to
your point there, of the biden administration doing that
? Because I will say in President biden's speech,
he did seem to signal the first half of that
really kind of, you know, pointing out that
these oil companies may be taking profit at a time
where there are people dying in a country because of
an invasion of of an aggressor like Russia. The
second half of that in terms of, you know
, taking punitive measures to stop by, you know
, stock buybacks? That hasn't happened yet? What's
the probability that that's going to happen if the administration
could get so bold. You know what? I
will have to confess that the biden administration, the
State of the Union, great tone, great theme
in terms of let's not lower wages, let's lower
costs. But the two biggest costs that are facing
America, the things that were a nightmare in the
CPI I released this morning our food and energy and
so far they've been incredibly bold and incredibly successful in
foreign policy, but their economic policy has really done
nothing to address these dramatic cost increases that american consumers
are facing. I think as I said, I
think you gotta get, you gotta put the screws
to big oil. They're not going to change their
behavior just because you asked them to, you're going
to have to declare an energy state of emergency.
You're going to have to forbid stock buybacks and you're
gonna have to forbid dividend increases until they get production
up. Also, they've got an opportunity to change
the farm subsidy program where you basically tell farmers,
look, we normally pay you not to grow crops
this year, we're going to give you your subsidy
probe payments no matter how much corn and wheat you
produce. Because remember Ukraine is the breadbasket of europe
, that's another big source of inflation. That's going
to get a lot worse if something isn't done.
So I do hope we that we see the biden
administration get a lot more bold, A lot more
courageous and frankly, a lot more effective in addressing
the economic consequences of this war and not just the
geopolitical consequences Really quickly here. I only have like
30 seconds. But I want to ask you this
question, could we get to a happy medium here
in terms of we meet the moment in which we
are at right now with the reality that we need
to produce more oil, but we also continue the
acceleration to clean energy. Can we do both?
We are not at the moment, but is that
a reality that we can get to? I do
think it is, but what the tragic problem is
is that we have relied on really bad actors and
, and not nice governments like Saudi Arabia and Russia
for our oil and now renewables. Well, nickel
aluminum steel, Russia has a big Chokehold on that
. And of course China is such a dominant provider
of so many of the input components that we're going
to have to have a strategy to transition away from
those that reliance upon bad actors in the renewable space
. If we're going to have a secure transition 10
years out to a renewable world where greenhouse gasses are
reduced. But also we're not so at the beck
and call of folks whose um, whose long term
goals are not the same as Western democracies. Michael
really appreciate your insight. Thank you so much.
Michael, jones Chairman and Ceo of Caravel concepts