Taps Coogan – August 9th, 2022

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Adam Rozencwajg, of the Global Natural Resources Fund at Chilton Investment Company, recently spoke with MacrVoices about his outlook for the global oil and gas industry. Mr. Rozencwajg argues that until resource producing companies deploy more capital aimed at increasing production, energy markets will remain “dangerously” tight and the commodity bull market is likely to continue, an argument we are very sympathetic to here at The Sounding Line.

The interview is too wide ranging for the excerpts but Mr. Rozencwaig sums up his outlook as follows:

“Some of the best times to be involved in resource markets and even in oil markets have been in periods of time historically associated with really poor economic growth. The most notable historical example would have been if you look at oil stock prices in 1929 on the verge of the Great Depression… through to the end of the 1930s. A basket of oil stocks was actually slightly positive over that period of time. If you did a commodities stock producer basket with a quarter gold, a quarter energy, a quarter base metals, and a quarter (agriculture)… I think you were up 85%-90% over those ten years. I think the stock market was down 50%… Commodities were really cheap going into that period. Capital had really been starved from the extractive industries… The same thing (happened) in the 1970s… Commodity stocks and oil prices did extremely well. It was the only place to hide…”

“In the last ten years we’ve had all this mal-investment across the board but in the energy space we’ve had a huge amount of mal-investment going into wind and solar and decommissioning fossil fuel plants and decommissioning nuclear plants, which was the dumbest thing we ever could have done, and we were able to do that because we had this backdrop of cheap, abundant, reliable energy…”

There is much more to the interview, so enjoy it above. 

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