Will the Energy Transition Be a Boon to Fossil Fuel?

A common view is that the transition to clean energy will lower energy prices. Many cite statistics that show that renewables are currently the lowest-cost energy source globally.[1] But will the transition to clean energy result in lower energy costs?

The Shift to Green May Leave Consumers with Less Green

One energy executive believes the shift to green energy will result in higher energy costs. Patrick Pouyanne, CEO of French energy giant TotalEnergies, believes that “governments are mis-selling the energy transition if they fail to acknowledge the shift to a less-polluting system will lead to higher energy costs.”[2] And he’s putting the company’s money where his mouth is.

Less Efficient System

Part of Mr. Pouyanne’s argument is that the shift to what he views as a less efficient system cannot result in lower prices. Renewable energy’s intermittency may make it a less efficient system. Supply and demand may not align as populations demand energy at times when renewables can’t meet demand. The sun does not always shine, and the wind does not always blow. Demand may peak at such times, leading to outages.

Additionally, governments may be pushing the transition at a pace that is faster than the growth of renewable energy sources, especially as global energy demand is expected to continue to grow rapidly.

Finally, the pace of transition may not occur simultaneously on a global scale. Developing regions, such as Africa, may not develop their renewable systems as rapidly as developing areas.

Renewables Supported by Fossil Fuel

A more realistic view espoused by Mr. Pouyanne is that the energy transition will require the growth of both renewable and fossil fuel energy sources. As a result, the company’s capital spending is allocated two-thirds to oil and gas and one-third to low-carbon power.

Higher Prices?

Total expects higher energy prices across the board, which is why it is investing in both fossil fuel and renewables.

You Can’t Have One without the Other

Total’s strategy highlights the potential reality that the energy transition will require more fossil fuel than people expect. This may have a positive effect on prices and the companies involved in the fossil fuel industry.

Range ETFs – For Exposure to Fossil Fuel

Range ETFs aim to capitalize on the enduring importance of nuclear and fossil fuels in the energy sector. These ETFs look to offer investors an opportunity to navigate the evolving energy landscape.

Explore our Range ETFs today as you consider your position in the energy sector.

• Range Global Coal Index Fund (COAL): seeks to provide exposure to companies involved in the metallurgical and thermal coal industry.
• Range Global LNG Ecosystem Index ETF (LNGZ): seeks to provide investors with exposure to companies involved in the liquified natural gas ecosystem.
• Range Global Offshore Oil Services Index ETF (OFOS): looks to provide exposure to companies in the offshore oil services ecosystem.

[1] One example: Renewables: Cheapest Form of Power, United Nations Climate Action website, Retrieved 2/27/24
[2] All data sourced from: Total Boss Warns Government Risk Mis-Selling Energy Transition, Financial Times, 2/12/24

Risk Disclosures:

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated investment objectives.

Investments in the energy industry are subject to significant volatility due to changes in commodity prices. Additional risks include changes in exchange rates, government regulation, world events, economic and political conditions in the countries where energy companies are located or do business, and risks for environmental damage claims.

Exchange Traded Concepts, LLC serves as the investment advisor of the funds. NUKZ, LNGZ, COAL, and OFOS ETFs are distributed by SEI Investments Distribution Co. (SIDCO, 1 Freedom Valley Drive, Oaks, PA 19456), which is not affiliated with Quasar Distributors, LLC, Exchange Traded Concepts, LLC, or any of its affiliates.