ESG causing Europe’s Energy Issues?

If you haven’t noticed what’s happening in the energy markets of late- oil and natural gas are on a bit of a tear this year, especially over in Europe, where they’ve been a bit more aggressive politically in their embrace and enforcement of ESG protocols and mandates.

Even good old-fashioned West Texas Crude Oil isn’t keen to miss out on the party too much – approaching $80/bl for the first time in seven years or so, which is a far cry from its negative print in the front-month futures around 18 months ago. (there’s a pod for that here)

Now, as the impact of towering energy costs billows through markets, we’re left asking if these moves higher result from supply chain issues and demand roaring back from Covid, or something a bit more insidious.

Enter Michael Kao, who we had the opportunity to do a podcast with not too long ago talking through convertible bonds and the train wreck that could be MicroStrategy, Michael Saylor, and that big Bitcoin holding on the balance sheet.

What we didn’t get a chance to discuss on the pod, Michael was kind enough to put out in a great thread on Twitter via his @Urbankaoboy handle not too long ago. It’s his thoughts and resulting discussion on what may have prompted these massive price increases and the coming disconnect between the ESG promise of lower hydrocarbons and what’s happening here in the real world where we still need a lot of non-ESG energy.

We’re not here to say ESG is good, bad, or indifferent – but @Urbankaoboy breaks down the rather unrealistic promise of ESG initiatives and moving away from hydrocarbons with some hard data and two problematic areas: transmission and carbon capture.

This one grabbed us. A throughput volume higher than the volume of oil flowing through the current us pipeline system… something that took over 100 years to build. WOW. Here are some graphics showing just how intense that statement is:


Crude Oil Pipeline Infrastructure


Natural Gas Pipeline Infrastructure


CTAs loving it =

Meanwhile, the trend following CTA world has been loving it, holding onto their months-long Longs as the trend continues. The SocGen trend indicator report shows four of the main market collectively contributing more than half of the gains for the ‘commodities’ sector YTD.


One rather prescient investor into the Cockroach Fund’s new Trend Series, which invests across multiple top-ranked trend-following CTAs, had this to say:

“…I am very high on commodities for the long term as well.  They are crazy cheap compared to the S&P, and I am convinced that the premature attempt to decarbonize is going to lead to a supply crunch in oil.  Apparently, just having a good narrative does not produce cheap energy:)”  -S.Q.


ESG Fueled Crisis?

A supply crunch caused by the attempt to decarbonize?  An interesting take, to be sure, and one echoed in this piece asking: “will ESG create the next Lehman moment?


“…most every day, we hear of a different policy plan to reduce energy production. We learn of new mandates, new taxes, more canceled pipelines, more canceled permits, and more penalties. What we don’t hear about is where the replacement energy comes from. The wind doesn’t always blow and sometimes it is cloudy. My car won’t drive on unicorn farts and billions of people in developing economies want a Western standard of life—complete with a Western level of energy consumption.

… What if the price of energy gets prohibitively high—a price where it bankrupts companies? What if there is no energy available at any price? Won’t the politicians blame the energy companies and enact excess profit taxes, further disincentivizing production? Who wants to produce energy when you’re the enemy? What if the feedback doom-loop continues, much like in 2008, but it just keeps on going with no end in sight?

…What if the coming energy crisis is the first crisis that the Fed will not be able to fix? If anything, more liquidity will simply cause greater demand for energy, at a time when none is available.  What if the Fed is ultimately forced to reverse course and raise rates prohibitively high to reduce energy demand? The Fed … cannot increase energy production.

…Over the past few weeks, we’ve seen the first few signs of the coming crisis. Various countries ran out of energy. These were regional problems with regional causes. However, the underlying problem was the same—they reduced the “carbon economy” before they had sufficiently built out the “green economy.”

Time to get your Managed Futures/ Trend on?

The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

The programs listed here are a sub-set of the full list of programs able to be accessed by subscribing to the database and reflect programs we currently work with and/or are more familiar with.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history. Individuals cannot invest in the index itself, and actual rates of return may be significantly different and more volatile than those of the index.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

Limitations on RCM Quintile + Star Rankings

The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.

See the full terms of use and risk disclaimer here.