EXCLUSIVE: Fossil Fuels Advocate Alex Epstein On Energy-Focused Investing, Green Politics

Alex Epstein is among the most provocative and controversial thought leaders in today’s energy sector.

As the founder and president of the Center for Industrial Progress think-tank and author of “The Moral Case for Fossil Fuels,” Epstein has challenged the arguments put forth by environmentalists and political activists regarding the impact fossil fuels have on the climate and the redemptive potential frequently attributed to renewable energy sources.

In this interview with Benzinga, Epstein considers the role fossil fuels and renewables play in the economy, and also offers insight on what investors should consider when weighing the publicly-traded companies involved in this ongoing debate.

Q: Where do you see the state of the fossil fuel industry for the remainder of this year and into 2022? Is this industry going to be able to withstand the various slings and arrows from the Biden administration and other green-hued people on Capitol Hill who blame it for climate change?

Epstein: It's hard to predict exactly what will happen because so much of it is political. But I think it's very important that the underlying economics in the U.S. and around the world are definitely in favor of the fossil fuel industry continuing and even expanding.

For example, if you look at what's been happening with natural gas prices — due to a lot of restrictions, particularly on pipeline capacity — we've seen more than a doubling of natural gas prices in the last year. In Europe, we're seeing a skyrocketing.

We're also seeing the inability of the renewables — or as I call them, the unreliables — to provide reliable electricity. We've seen that in California and in Texas. So, you have an interesting combination of enormous political hostility toward fossil fuels, but then I think there is an emerging understanding that they are still very much necessary and trying to get rid of them will have very negative consequences.

Related Link: Harvard Will Move Away From Fossil Fuel Investments: Why It Matters

Q: In your opinion, are fossil fuel companies a good investment for people who want to buy or trade stocks?

Epstein: It's not my expertise, but I would say most people in the investment world have been taken in by a lot of green energy propaganda, where there's a lot of wishful thinking.

When I got started in energy about 14 years ago, peak oil was a very popular theory among many people in investment, but it didn't really make any sense. It was just sort of a fashionable thing. And I think both the idea of renewables rapidly replacing fossil fuels and the idea of imminent climate catastrophe are popular ideas that don't have any real foundation.

I think investors should look into that. That is, they should be aware the market tends to significantly undervalue the unique cost-effectiveness of fossil fuels and certainly dramatically overestimates very negative climate consequences. I do believe we impact climate. But the idea of climate catastrophe, I think, is a fiction.

Q: You are front and center articulating the value of fossil fuels, but what about the industry itself? Is the fossil fuel industry its own best spokesperson?

Epstein: No, definitely not, with a few exceptions. One thing I'm proud of is that I've inspired some CEOs to speak up with my book “The Moral Case for Fossil Fuels.”

For example, a CEO named Adam Anderson of Innovex last year spoke very effectively when The North Face refused to sell them custom jackets. He wrote this very articulate and proud open letter that got a ton of attention, and it was really revealing that The North Face really had nothing to say — they seemed so confident beforehand, but they had no response to this moral case for oil and gas.

So, there are some outstanding people that are emerging. But if you look at the general posture of the industry, it's very much adopted the language of “we are in an energy transition.” And “energy transition” is really a euphemism for “fossil fuel extinction.”

This rhetoric is largely driven by the modern ESG — environmental social governance movement — that’s being pushed by government and by financial institutions, so companies are getting rewarded for engaging in what I would regard as energy transition propaganda. And they are getting punished if they say favorable things about fossil fuels.

So, I think they're not speaking well for themselves and investors should be aware of the dynamics. When you hear fossil fuel companies talk about energy transition, these public statements do not reflect what they actually think. You should be aware that these are distorted statements mostly coming from ESG pressures rather than people's actual conviction that we're going to rapidly eliminate fossil fuels.

Q: What is your take on the electric vehicle sector? A lot of people, including the Biden administration, are pushing this as being a green solution to all of the pollution coming out of cars. Are electric vehicles as green as people say they are?

Epstein: Electric vehicles for smaller vehicles are a plausible competitor to gasoline vehicles, or at least they could become a plausible competitor. Right now, they are not cost-effective for most people and the prices aren't declining quickly, which is, by the way, another distortion that's going on in markets because people tend to believe these very rosy scenarios about rapidly declining battery prices.

They do have certain advantages, including no tailpipe emissions, which is a nice thing to have. But there is a lot of mining involved, particularly for the batteries, and I think that's fine as long as it's recognized that this can be subject to a lot of abuse. Right now, it's done with poor environmental practices in many parts of the world.

Another thing with EVs is they depend on an expanding and ultra-reliable low-cost electricity grid — and that's the exact opposite of the direction we're moving in by mandating more solar and wind. Where I live in California with 24% solar and wind, we have increasing prices, decreasing reliability and, enormous reliance on our neighbors — we import something like 30% of our electricity. We've seen similar dynamics in Texas and Germany.

So, with situations like California where we can't produce reliable electricity, we're mandating this new massive consumer of electricity. That really shows the poor thinking of our elected officials.

Q: What about the still-gestating infrastructure bill with the provisions the government will be paying for the installation of EV charging stations around the country? Is that the government's job?

Epstein: No, it's definitely not the government's job. This is a classic example of the government arbitrarily deciding on a certain thing, instead of free people deciding what they want. If these are actually economical, then people will buy and build their own charging stations. It’s not the government's role and it's going to be a debacle.

Photo: Alex Epstein, photographed by Gage Skidmore / Flickr Creative Commons.