So everyone loves the oil stocks and the electric vehicle stocks and the hydrogen powered truck market.
Can they co-exist?
Short-term yes. You can buy a Chevron (CVX) or a Kinder Morgan (KMI) - the pipeline company - or Pioneer Drilling (PXD) without any problem. Lots want to go deeper purchasing more challenged companies like BP (BP) , Exxon (XOM) or even Occidental (OXY) .
At the same time, though, people want to own Tesla (TSLA) with a stock that is now bigger than the sum of the capitalization of ALL autos. Crazy? Does it matter? If you can sell millions of shares right here then the price is right.
More important, though, is the rush toward stocks like Plug Power (PLUG) for hydrogen and QuantumScape (QS) for electric batteries and, literally, dozens of imitators. And the new Congress which will go with President Biden in supporting far more generous incentives to go with cars buyers that shop for electric vehicles or Amazon (AMZN) , Microsoft (MSFT) and the like that want to roll back carbon emissions.
They only way to do this? Cut fossil fuel use.
So we have a classic investor dilemma. On the one hand we have a much tougher time drilling which cuts to less supply and higher prices in this country, and, because of the Saudi cutback, the world. Remember, Trump was bad for oil prices because you could drill anywhere. He wanted drilling in the Arctic Reserve for heaven's sakes. But Biden is good for oil because he will cut back where you can drill - no federal lands - and tighten methane release, which is a real drilling killer because it's a natural byproduct of drilling. Plus, I expect Biden to push for carbon capture which makes drilling really prohibitive given all the carbon dioxide that gets spewed by new wells.
So, short-term the market favors buying the oils.
Longer-term? Not only do things cut against fossil fuels - including climate change rules as well as the desire from all corporations to lower their carbon footprint and, of course, the emphasis on electric batteries - but, perhaps most important, an imperative to sell the fossil stocks sooner rather than later.
Look, we can always view stocks by how the companies underneath them do.
But I think that the election last night plus the policies of so many Democrats, especially the president and vice president, cut to the selling of oil stocks as a statement, a way to be able to show that it is time to think more about the planet and less about profits.
We saw this a few years ago when the market turned against coal, despite President Trump's policies. Fund managers couldn't countenance buying stocks of companies that are so destructive to the environment.
Now fossil fuels will be in the crosshairs of almost all managers as the global warming issue becomes central.
So I say party on if you want to buy the stocks now that oil trades at $50. But remember, there comes a certain point where supply and demand do not matter. What matters is the statement you must show to your investors, most of whom favor a smaller carbon footprint, and a reversal of global warming, that you cannot countenance supporting oil and gas any longer. That doesn't mean drill baby drill, but sell baby sell as the Biden regime takes over.