The Strait of Hormuz is a narrow strip of water connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. Just a few dozen miles wide and quite deep, it’s uniquely defensible, should one be so inclined, and thus generally not a place where responsible actors would drop bombs on the gatekeepers for no fucking reason. About twenty percent of the world’s oil flows through it each year, primarily to China, Japan, and other large Eastern economies. The Strait is an utterly fascinating area of a complex region; We’d love recommendations for books and documentaries, should our readers have any. But we’re not here to talk about it today, not really.
Normally in these pages, we try to keep a certain amount of intellectual distance. It’s a newsletter about the business of climate tech, after all, and business should rarely be personal. Except when it is.
I was 12 years old in 2001, and just starting, as kids do, to realize that the world was slightly more complex than the bubble of my childhood had led me to believe. Reading the news this weekend reminded me deeply of watching television in the long, slow, tense weeks and months after 9/11. Regime change… pre-emptive defence… security…. Weapons programs… sleeper cells in America. All the greatest hits, with sides of cynicism and existential horror.
We know that it was really about oil back then, and probably now. Maybe it always is. The stock market opened up for the week. Oil, like everything, is a business of supply and demand. The Strait potentially being closed sent prices to the roof, just as the promise of a ceasefire is sending energy stocks tumbling. Incentives are always the main thing. You will find no conspiracy theories here; This isn’t Michael Clayton (great movie though), and there are no energy lobbyist fixers manipulating the global political stage. This isn’t because we doubt their desire to do so, to be clear, but because we think they’re much less competent than is commonly assumed.
After the last Presidential election, we saw company after company pull back on their net-zero commitments, their Scope 1-3 targets, and end any transparency around emissions whatsoever. This landscape was already in rough shape. Oil & Gas companies love to spend marketing dollars telling the world about their desire to be part of the solution, and yet provide just 1% of clean energy funding in 2024. Money talks, or in this case laughs derisively.
We’ve written before that the energy transition will require the oil & gas majors to enthusiastically invest and participate, and we stand by that assessment. It would be cool if fusion could work yesterday and solve all our problems, but the most positive assessments of the tech put it years away at any scale, and much longer to power the majority of the grid. This is assuming fusion works at all which, definitely maybe. Until then, only the legacy energy companies have the scale, the infrastructure, and the capital to tilt the curve on the energy transition. But if there’s one thing this week has taught us, especially in the context of this strange, sad year, it’s that their incentives in this situation are frankly perverse.
We try to be good about closing our rantier pieces by offering solutions, or at least actions available to the average reader. It’s difficult to do that here, given the simple reality that the United States is currently run by a nihilistic, profit-worshipping death cult. Still, there are a few things that can help.
If you are in a position to make decisions about the procurement of energy, on literally any scale, choose renewables. An example; following a
6 week5 day blackout last November, we began looking into the purchase of backup power solutions for our home, and ended up with one consisting of solar panels and batteries, rather than the ubiquitous small generator. Not much, but something.Pressure lawmakers as much and as specifically as possible. We’re thinking especially of the proposed, horrific plan to sell much of the public land in the Western US to commercial interests. Call, write, and yell.
If you are in a position to buy an EV, buy an EV, and not from Tesla. No, the other auto companies are not great, but their business is considerably less dependent on carbon credits.
Lastly, if you’re an entrepreneur playing with a potentially scalable technology in renewables, materials science, batteries, or grid backstops…. Try to raise money from the Oil & Gas majors. Do so very carefully; No automatic pro-rata that can give them control of your board and IP in subsequent rounds, no discounts for them as a buyer or other portfolio companies, no right of first refusal for anything whatsoever (deals, partnerships, exits). But, try to get their money. The long-term trends in oil demand and prices are down, and renewables continue to accelerate. We can also work to hasten it along on both sides of the equations. Yes, we know this will be controversial. These are weird times.
In other news
Our favorite Finnish sand battery company, Polar Night Energy, has delivered and commissioned their new largest installation. It rules and we want one. Also, we want to invest and help bring the good word of sand batteries to North America. Hey PNE, call us? $100 to the charity of your choice for any reader who can introduce us to the company. Yes, we’re serious.
Tesla has Robotaxis now! We are still skeptical about all of this. Even leaving aside Elon Musk’s behaviour over the past couple of years, Tesla’s bet on on-device AI and camera systems for self driving is just really, really tough to make work at any scale. We have, like many, compared Tesla against Waymo a number of times, usually in the context of relentless mockery, but the fact is that the companies are picking almost entirely different attack vectors to an enormously complex problem; Waymo uses geomapping, LIDAR, and more centralized compute, while Tesla is going for true autonomy. Despite our many, many issues with Tesla, we actually wish them success here. EV, self-driving taxis are a key decarbonization lever, and humans should absolutely not be allowed to drive themselves anywhere and for any reason. We’re terrible at it.
Our internet buddy Skander Garroum of the wonderful Climate Drift published a history of EVs, which made us snort beverages at least 4 separate times. Skander, thank-you. We needed this.
Question we’re pondering; What should the capital stack for fusion actually look like? Hit us back with your thoughts.
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