Feb 7th 2020

Cramer: “We’re in the Death Knell Phase” of Big Oil, as 44% of Norway New Autos are Electric

by Juan Cole

Juan Cole is the Richard P. Mitchell Professor of History and the director of the Center for South Asian Studies at the University of Michigan. His latest book, Engaging the Muslim World, is just out in a revised paperback edition from Palgrave Macmillan. He runs the Informed Commentwebsite.

Ann Arbor (Informed Comment) – CNBC stock picker Jim Cramer startled his conservative fan base this week by refusing to push ExxonMobil and other petroleum stocks. He solemnly informed his audience that he is “done” with fossil fuel securities. He pointed out that pension funds all over the world are divesting from them because of pressure from a younger generation of investors who do not believe you can ever make a fossil fuel company sustainable. (This is true, you cannot. Their business model is to have us burn the fossil fuels, which releases billions of tons of heat-trapping carbon dioxide, which is wrecking the planet.)

We are, he said, “in the death knell phase.” He adds, “It is actually happening pretty quickly. You’re seeing divestiture by a lot of funds. It is going to be a parade that says, ‘These are tobacco, and we’re not going to own them . . . We’re in a new world.”

CNBC: “Jim Cramer: ‘I’m done with fossil fuel’ stocks”

Jim Cramer is not a liberal. He isn’t saying these things to be politically correct. He is being hard-nosed and realistic. Most people under 40 don’t want those stocks.

In comparing petroleum securities to tobacco, Cramer is admitting that a large segment of the public now sees them as injurious to public health. This conclusion is correct. Sixty percent of Americans want to reduce dependence on fossil fuels.

Such attitudes are changing rapidly. The Australian establishment was wedded tightly to climate denialism until it was shaken by having the whole continent go up in flames this winter (their summer). The likelihood is that the Australian public will begin finally to turn against coal in the aftermath. As countries are badly hit by climate crisis effects, the public will start voting to outlaw fossil fuels.

There is, however, another reason to get out of petroleum stocks right now, besides environmental consciousness.

Petroleum isn’t going to be needed much longer. The world over the next few years will rapidly experience a technological disruption, as millions of families buy electric vehicles and fuel them from the sun and wind. Petroleum will still have some minor uses. Petrochemicals are useful as soil fertilizers, but the demand isn’t such as to drive a high price for it. Oil is used to make plastics, but we probably should outlaw that, too. Petroleum securities will likely soon be a penny stock.

Investing in them is like investing in zeppelins just before the Hindenburg disaster, or like investing in Blockbuster video stores just before video streaming came along.

China is causing jitters with its goal of having 25% of new car sales be electric in only 5 years. Not only would that development vastly reduce China petroleum demand, but some analysts worry that the Chinese manufacturers will be driven by government directives and incentives to over-produce EVs. In that case, inexpensive Chinese electric vehicles would flood the world market, as well. The government has reduced consumer incentives to go electric since last summer, causing a dip in EV sales. But if the Communist Party really wants 25% of new cars to be electric, it probably can make it happen.

In Norway in January, 44 percent of new car sales were electric. This is up from a 2019 average of 42 percent. Admittedly, Norway has high tariffs on imported cars, but exempts electric cars from those taxes, so it is actually cheaper to get a really nice electric car than a gas guzzler. But the fact is that governments will increasingly use taxes and other policy tools to get rid of gasoline vehicles, as with China. What we’re seeing in Norway is not artificial, it is just the future.

Even the erratic Tory Prime Minister of Britain, Boris Johnson, announced Tuesday that his government would bring forward the date on which it would ban new gasoline vehicles to 2035. Nor is that likely the last word. I’d personally be surprised if anyone was buying vehicles powered by fossil fuels in 2035.

In fall of 2020, a whole raft of new electric vehicles will be on sale, and preference for them will begin ticking up. Volvo’s relatively affordable new all-electric SUV, the XC40 Recharge, is in my view likely to be a star. And lots of sedans are coming.

The “electrifying” stock surge for Tesla recently demonstrates that the Market knows where the world is going, though obviously this process will have its ups and downs. (Caveat: I own a little Tesla stock.)

Electric cars are just on the verge of being a technological disruption for societies. I wrote a few years ago,

  • Rapid falls in price of materials and installation because of mass production will produce a technological disruption, as Tony Seba of Stanford calls it. There are tipping points in technology adoption such that sometimes old technologies are superseded with lightning speed. Seba shows a photo of the Easter Day parade down Fifth Avenue in New York City in 1900, and it is almost all horse and carriages with one automobile.

     

    Screen Shot 2015-08-04 at 4.08.56 AM

    He shows another slide, of the same parade in 1913 after the Model T came out. It is all automobiles.

    Screen Shot 2015-08-04 at 4.11.23 AM

So all that is why Cramer is talking about the death knell of petroleum stocks. We probably agree on almost nothing else, but when people are right, you have to give them credit. He is right.

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Sep 16th 2020
EXTRACT: "Seventy-five years ago, the prestige of the United States and the United Kingdom could not have been higher. They had defeated imperial Japan and Nazi Germany, and they did so in the name of freedom and democracy. True, their ally, Stalin’s Soviet Union, had different ideas about these fine ideals, and did most of the fighting against Hitler’s Wehrmacht. Still, the English-speaking victors shaped the post-war order in large parts of the world. The basic principles of this order had been laid down in the Atlantic Charter, drawn up in 1941 by Winston Churchill and President Franklin D. Roosevelt on a battleship off the coast of Newfoundland."
Sep 14th 2020
EXTRACT: "After Trump’s inauguration in January of 2017, millions demonstrated their disapproval. We can expect the same, no matter how this election turns out. With both sides framing this election in “end of the world” terms; with the president calling into question the legitimacy of the vote, even before it happens; and with the president warning his supporters that they may have to take up arms to defend him – we have a recipe for disaster that may occur in the days that follow this election. This may very well be the Armageddon election of our lifetime."
Sep 8th 2020
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Sep 7th 2020
EXTRACT: "China’s footprint in global foreign direct investment (FDI) has increased notably since the launch of the Belt and Road Initiative (BRI) in 2013. That served to bring Chinese overseas FDI closer to a level that one would expect, based on the country’s weight in the global economy. China accounted for about 12% of global cross-border mergers and acquisitions and 9% of announced greenfield FDI projects between 2013 and 2018. Chinese overseas FDI rose from $10 billion in 2005 (0.5% of Chinese GDP) to nearly $180 billion in 2017 (1.5% of GDP). Likewise, annual construction contracts awarded to Chinese companies increased from $10 billion in 2005 to more than $100 billion in 2017."
Sep 2nd 2020
EXTRACT: "Emergence and spread of the coronavirus COVID-19 have created and still creating health issues, economic challenges, political crises and social conflicts around the world. These challenges and conflicts lead the international community to re-evaluate global governance and international structures, which is based on the second world-war and post-cold war. The pandemic will emerge a new era of international society that will not be similar to the pre-Corona world."
Aug 28th 2020
EXTRACT: "Russia has changed, and has been changing, since its beginnings in ancient Muscovy to its current condition as Putin’s realm. Some general features appear in much of Russian history. Most of its rulers have been authoritarian—but so, too, were most of England’s, France’s, and Germany’s. Many of its political and intellectual elites have considered Russia a special civilization deserving a place in the sun—but just as many have not, wanting to transform Russia into a Western state with Western values. Many Russians have been enamored of their country, but even more have probably damned it for destroying them and their children. What, then, is Russia? It is, and has always been, many, oftentimes contradictory, things—sometimes coexisting, sometimes getting the upper hand, always shifting, always eluding simplistic analysis. But, and this needs to be emphasized, the same holds true for every other country in the world."
Aug 26th 2020
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Aug 26th 2020
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Aug 26th 2020
EXTRACT: "the European Union is a community of values as much as an economic and trade bloc. But the behavior of member states such as Poland and Hungary has called into question their commitment to liberal democracy. Above all, in the US, President Donald Trump is widely criticized, even by lifelong Republicans, for not respecting or understanding the US constitution and the separation of the executive, legislative, and judicial branches. Does Trump even believe in democracy? Does he want all Americans to vote in November, regardless of race or party affiliation, or only those who will support him? And will he accept the election result if it goes against him? "
Aug 25th 2020
EXTRACT: "The fundamental difference in values between the West and China will remain indefinitely, and it is here that the West must draw the line. Any concession that entails a sacrifice of fundamental principles, for example in cultural matters, must be rejected. If this values-based approach results in economic disadvantages, so be it. By the same token, the West should abandon the conceit that it can push, force, or cajole China to become a democracy wrought in its own image. "
Aug 16th 2020
EXTRACT: "China is light years ahead of most of the rest of the world in deploying digital payment technology. Alipay or WeChat Pay apps are all that is necessary to accomplish almost anything that requires a payment in China; the country is largely already making paper money obsolete. "
Aug 15th 2020
EXTRACT: "Seven hundred fifty billion euros is less than 5% of the stock of US government debt held by the public. It’s a drop in the bucket, in other words. And a drop does not a liquid market in safe assets make. Even if this really is Europe’s “Hamiltonian moment,” ramping up EU issuance by a factor of 20 will take decades. "
Aug 14th 2020
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Aug 11th 2020
EXTRACT: "Last year, in the midst of the country-wide protests against corruption, I was honored by a Lebanese humanitarian organization. I began my remarks paraphrasing Kahlil Gibran’s poem “You have your Lebanon, I have my Lebanon.” Like Gibran, I love the Lebanese people, their poetry, art, song, and love of life. I love their generous and welcoming spirit. I also love what Lebanon has given to the world – especially its gifted people. And I love the sheer beauty of the country – its majestic snow-capped mountains and its pristine seascapes. And, like Gibran, I do not love Lebanon’s petty bickering politicians who lead because of an accident of birth. Nor can I embrace the country’s system of sectarian privilege and the corruption that is endemic to the political-economic regime that has squeezed Lebanon dry to the benefit of their chosen ones. And I reject the armed militias, whether they be Christian, Muslim, or secular that in the past and in the present continue to torment those who challenge their dominance. I told the audience that the Lebanon I loved was in the streets making their voices heard demanding fundamental reform – an end to sectarianism, corrupt feudal elites, and rule by force of arms."
Aug 8th 2020
EXTRACT: "It is time for the world’s governments and companies to wake up. Beijing’s reach is wide and deep. It is taking advantage of the West’s openness – and gaps and inconsistencies in our data protection protocols - to acquire information on all of us. The hacks on Anthem, Equifax, Marriott, and the US government are good examples of how they have already done so. American and Western companies need to take a hard look at the costs and benefits associated with operating in China and continuing to have Chinese partners. Those partners must comply with these Laws. American and Western companies that continue to operate with them may unwittingly well be aiding and abetting the Chinese government."
Aug 5th 2020
EXTRACT: "James Murdoch is not the most obvious candidate for editorial heroism. His route to resigning from the News Corp board because of “disagreements over certain editorial content” has been circuitous and colourful."
Aug 4th 2020
EXTRACT: "Say what you will about the slippery slope the US government has been on since Trump came to power, America has a rich history of promoting creative thought, running head-first into particularly uncomfortable subjects, and encouraging robust debate internally and among its allies and partners. Once Trump leaves the scene, America is sure to be perceived as having briefly lost its senses and will come charging back into the mainstream of global thought, debate, and engagement. China has entered the global arena crippled by its own ideology. Ultimately, the US is better equipped to lead the world. It knows that, and so does most of the rest of the world. Someone had better tell Beijing."
Jul 29th 2020
EXTRACT: "The Chinese government has for years argued that its ‘nine-dash line’ of sovereignty over the entire Sea is based on centuries of maritime history, and that China’s claim is air tight. The Chinese Foreign Ministry has even asserted that ample historical documents and literature demonstrate that China was “the first country to discover, name, develop and exercise continuous, effective jurisdiction over the South China Sea islands”. "
Jul 23rd 2020
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