Well, it's snowing in Saudi Arabia. Quite a bit, actually. So, with that bit of real-time information, those of us in the rest of the world can come to the inescapable conclusion that we are in an unwavering inferno of heat. Except where it's cold -- and there, it's record cold.
We need to accept the fact that there are going to be some borderline-idiotic, Rube Goldberg-style solutions to a problem that man discovered thousands of years ago. Carbon is a terrific store of energy and it burns like crazy, so you can keep yourself warm with it and/or use that energy in different forms to make something spin and create propulsion. It's pretty basic stuff, but we have now decided that planet Earth will be much better off if we don't use such simple solutions. We'll see. Then again, no one would ever vote for me for any office of any kind, so I am forced to watch what politicians do and react to it.
The thing that drove me to this realization was a press release from a company called Mabanaft, a subsidiary of Marquard and Bahls. Yes, that sounds funny in English, but it is a German company. Mabanaft has decided to use the abundant wind energy of the Magallanes region in Chile to produce energy and to combine that energy with naturally occurring CO from the air to create e-fuels, both alcohols (methanol and ethanol) and eventually even e-gasoline. Much easier than drilling a hole in the ground!
But that's the world in 2021. The problem with the Mabanaft energy plan is not the science, it is the distance. Magallanes, located near Tierra del Fuego, is sparsely populated and already has abundant wind energy to power what little local demand there is. We see this over and over and over, from the frozen tundra of Saudi's Ghawar oil fields to the incredible urban density of cities such as Shanghai, Beijing and Tokyo.
In the places where energy is abundant, not that many people live. In the places where people live, there is rarely abundant energy. Houston, the No. 4 city in the U.S., is one of the few exceptions to this rule. So, Houston, we have a problem. If we are going to decarbonize the world, we are either going to need to go back to the Middle Ages and give everyone a home-based solar system and one of Elon Musk's Powerwalls or fix the system that already exists.
It's going to be option No. 2. We are going to see a greening of the world's combustion-based systems, and with a much greater reliance on hydrogen-based fuels and natural gas, which in its pure form only contains one carbon atom to go with its four hydrogen atoms. This is happening now, but, again, as the Mabanaft-Chile example shows, it is still imperative to get the energy from where it is produced to where it is consumed.
That brings me back to one of my old industries, one that I have frequently covered for Real Money and am almost always invested in in some fashion: shipping. Those ships could easily run on e-fuels, and though most international shipping regulations deal with sulfur emissions, decarbonization is not far behind. But we can't decarbonize our power generation without the less-carbon-intensive fuel brought to us by ships that are in turn burning that less-intensive fuel. Whew! Got all that?
As I noted in my last column, LNG (liquefied natural gas) shippers are facing an incredibly hot end market now. I noted that Golar LNG (GLNG) , GasLog (GLOG) and Flex LNG (FLNG) as stocks to buy now to play the incredible jump (as much as 14x in the Asian benchmark in the past year) in LNG prices. I will stick with those names and I would note that Wes Edens, Fortress Energy veteran and co-owner of the Milwaukee Bucks, is all over that trade with his current entity, New Fortress Energy (NFE) . NFE is investing heavily in LNG terminals in Brazil and in LNG ships as well. Wes is not a bad guy with whom to co-invest, as his track record clearly shows.
Last but not least, we are still using a lot of oil on this planet. My favorite oil tanker stocks are DHT Holdings (DHT) and Euronav (EURN) . Not sexy, but incredibly well-positioned to play the hypocritical demonization of oil in the very countries that consume the most of it, which are not the ones that produce it.
Stick with these names, and keep collecting dividends. Higher demand in an industry that is supply-constrained will always produce higher rates, and those rates will always drop to the bottom line. In a world where so little else does, that makes sense.
