The following contains excerpts from The Holy Grail of Investing, co-authored by CAZ Investments founder, Christopher Zook
“The world’s population currently uses about 100 million barrels of oil per day (or 36 Billion barrels per year), and that number is only expected to grow. By 2050, most experts believe that the total global energy demand will increase by roughly 50 percent. This becomes a major challenge as investment to find new supply has also been decreasing over the past decade, creating significant supply-demand imbalance.
The global “supply decline rate” is 7–8 percent per year. This means that existing fossil fuel reservoirs and deposits are losing 7–8 percent of their total finite capacity per year. That’s 7–8 million barrels of daily supply that we need to find/replace each and every year just to keep pace with current demand, not to mention attempting to meet the future growth of demand. Depleting finite projects with not enough spending to replace them is a recipe for constrained supply, foreign dependence, higher energy prices, higher food prices, and higher consumer prices.”
The Great Transition
While we all share a goal of cleaner energy sources/solutions for our planet, the timeline for such a transition needs to be prudently weighed amongst all nations, including those developing countries who live in relative energy poverty. Also, we can learn from history just how long it takes for humanity to transition to newer sources.
In the mid-1800s we began transitioning from wood to coal. It took approximately fifty years for coal to reach 35 percent of global energy market share. While coal has lost market share (as a percentage) relative to other energy sources, in 2022 we used more coal than EVER in history. Coal remains the largest source of energy for electricity and is vital to the production of concrete, steel, paper, and more. To provide perspective, China currently generates 63% of its electricity from coal.
In the early 1900s, following the production of Henry Ford’s first Model T, we began transitioning from coal to oil. It took fifty years for oil to reach 25 percent of global energy market share. In 2023, we are on track to use more oil than any year in history, with 2024 projected to be even higher.
In 1938, the U.S. passed the “Natural Gas Act” to regulate the transition from oil to natural gas. It took natural gas fifty years to reach 25 percent of global energy market share, and as with oil, 2023 will mark another year of record demand, with 2024 demand expected to grow as well.
Around 2010, society began the move toward wind, solar, and other renewables. Today, after thirteen years and nearly $1 trillion invested, these renewable sources provide roughly 3 percent of the world’s energy needs. With trillions of committed capital by Governments and investors alike, renewables will undoubtedly continue to be a driving force for the world’s energy needs. In addition, we must also look to innovation to solve for dirty energy. There are literally hundreds of innovative companies with potential or proven solutions that accomplish carbon capture (and storage) while still using traditional fossil fuels as the basis.
The energy transition, or evolution, will create significant investment opportunities in both the short and long run. That said, energy is notoriously volatile and requires a deep understanding of supply and demand, geopolitical forces and future casting. Our approach is to lock arms with a strategic partner that has boots on the ground, decades of experience, and a proven track record.
- China is currently building twenty-one nuclear plants. In addition, they are investing half a trillion dollars to build 150 reactors in the next fifteen years!*
- Consider China, Russia, Iran, Kazakhstan, North Korea, and Venezuela. These six totalitarian regimes have dominant control over the minerals (see chart below) we require for cell phones, tablets, EV batteries, solar panels, windmills, and more.
- Elon Musk has been quite vocal about his concern that there is “insufficient energy” for the U.S.’s goals and that we could reach a shortage in as little as two years. He predicts that our electricity demand is going to triple by 2045.