Buddy Herold

It is confusing that despite strong returns (XEG +14% YTD, some energy funds (ahem) up >20%), that the sector remains for sale every single day. Just think what could happen when investors finally buy into what we believe: that the energy sector is in a multi-year bull market.

Important development: sentiment towards the energy sector remains at a record low, and in my opinion one of the largest reasons for this has been the relentless doomsday preaching by the IEA proclaiming "the end of oil." This narrative, supported by eco-evangelistic "scenarios" based on hope and political aspirations, completely distorted investors' and politicians' views alike on the long-term outlook for oil. The result? Lack of interest in energy equities (= depressed valuations) and an accepted belief in "stranded asset risk" which lead to rise in investor activism encouraging oil companies to pivot towards renewables. For those who succumbed to the pressure, the result was the incineration of billions of dollars from poor investments. Too, given the change in investor demands, companies stopped adequately investing in new projects, with the growth rate of non-OPEC supply forecasted to peak this year. We will soon wake up to a world where the largest source of incremental supply of the past decade (US shale) is no more, OPEC will have little if any spare capacity, and yet the fairy tale of imminent peak oil demand will now be replaced with the view that the demand for oil will grow for decades more! I'm hopeful that this pivot by the IEA will lead to a meaningful improvement in sentiment towards energy stocks, while also allowing politicians, especially in Canada, to see the world through a more realistic energy lens. The era of "energy ignorance" must come to an end...it has cost our country too much already.