Oil Versus Electric Vehicles as an Investment (Hint: Where is the Extra Electrical Capacity Coming From?)

https://financialpost.com/investing/electric-vehicles-are-a-great-story-but-oil-and-gas-may-be-the-better-investment

"...While these kinds of lofty ambitions are getting significant attention, we are left wondering just how achievable they really are. California, for example, experienced blackouts this summer due to spikes in air conditioner use — how specifically is it going to handle the incredible demand from the conversion to electric vehicles in only 15 years?

...Here in Canada, Suncor (SU:TSX) is trading only 11 per cent off its low whereas Exxon (XOM:NYSE) is 10 per cent off its low. For some further perspective, both stocks have lost more than 57 per cent of their value over the past five years. As a whole, Canadian producers as represented by the Capped Energy Index are down a whopping 65 per cent while U.S. producers as represented by the SPDR S&P Oil and Gas Exploration and Producers Index have been crushed losing over 73 per cent of their value in the past five years. Think about this, especially with WTI oil prices only being down 4 per cent over the same period.

Finally, take a look at the forward curve that currently has oil prices over $46 per barrel out in 2025 and over $51 per barrel out in 2030. According to Eric Nuttall, senior portfolio manager at Ninepoint Partners, at those prices producers are currently trading at roughly half of their historical Enterprise Value to Cash Flow multiples, which in theory implies they are factoring in forward oil prices half that of what oil futures are currently trading at. If this is the case, it makes much more sense for companies to acquire a barrel than drill for it.