Climate Summit - Crude Moat

Macro Perspectives: Fri 23 Apr 2021

Biden kicked off his two-day Climate Summit - the participants included world leaders, major bank heads, the largest pension fund in America, and even the Pope.

As we discussed yesterday, we should expect this summit to kickstart the promotion of "climate action" in the media. What were the top four stories yesterday afternoon on the New York Times website? Climate.

With that pretty easily telegraphed, in my note yesterday we looked at opportunities to buy a dip in three clean energy stocks (FSLR, TPIC, CREE) - as the climate-action-theme gets moved to the front-burner for markets. All three stocks were up big by mid-day.

Oddly enough, another winner that could be catalyzed by today's event is oil. As part of Biden's speech, as a means of promoting a jobs narrative, he said he can "see workers capping hundreds and thousands of oil and gas wells" around the country.

As we've discussed, this vow to kill fossil fuels only builds a moat around the existing producers, and it ensures much, much higher oil prices. Demand for oil isn't going away anytime soon.

Let’s take a look at the chart…

Similar to the clean energy stocks we looked at yesterday, you can see oil has taken a breather in the past month or so. You can also see in the chart, the run that oil prices made after the election. With that, similar to the clean energy stocks, oil is a dip to buy on this escalation of the climate action narrative (oil and gas stocks, too).