The latest research from Jeff Currie, Chief Strategy Officer of Energy Pathways at Alfa—explores the forces shaping energy markets and how the next phase is being driven by nations’ desires for energy security. Download the report and read more below.

• Security is now paramount. The energy transformation is on the cusp of reaccelerating. Nuclear and renewable energy are likely to continue to expand rapidly in the years to come. Fossil fuels, however, will also expand—just more slowly—as natural gas replaces oil and coal fades. Climate concerns, however, will not be the main driver of The New Joule Order. It will be driven by the quest for security, with nations creating a diversified energy mix of joules across multiple sources to insulate themselves (and investment portfolios) from geopolitical, macro, and financial risks.
• Security drives higher returns and faster transition. Fossil fuels are attractive as they can be traded. If trade is under threat, then so are fossil fuels. Non-fossil fuels are generally not traded and hence are local. These types of fuels thus become more demanded when security is paramount, which historically drives a more profitable, cleaner, and faster transition. The security-motivated transition (1973-1993) seen after the first oil crisis was about the same – if anything, 30 basis points per annum faster – than the Net Zero-motivated transition of 2010-2024.
• “Peak Oil” has already arrived as “Peak Trade.” Fossil fuels are not disappearing any time soon. However, we are now likely seeing “Peak Oil Trade,” particularly from China. If consumers are able, they will try to reduce their imports of fossil fuels, which in most cases will mean increasing their supply of nuclear and renewable energy. The green premium has already faded and the market is in search of a security premium.
• The investment thesis is strong. Investors have been overly fixated with how energy is produced at the expense of how it is consumed (i.e. levelized cost of energy (LCOE) over return on equity (ROE)). But all consumed energy is the same—it’s a joule. Produced energies differ—a molecule of oil, an electron of electricity, a tonne of coal. The legacy of the Net Zero 2050 investment boom (arguably, 2010 through 2021) is that it made renewable energy cost competitive, but did not resolve system bottlenecks. Instead, malinvestment and grid congestion followed. As a result, forward demand expectations suggest that some energy sources for joules, particularly fossil fuels and nuclear energy all remain substantially underinvested relative to forward demand expectations.

Read The New Joule Order 
by Jeff Currie

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ABOUT THE EXPERT

Jeff Currie is Chief Strategy Officer of Energy Pathways at Alfa.

Mr. Currie focuses on conducting analysis of commodity market trends and the evaluation of new investment opportunities across energy markets and the commodity supply chain central to the energy transition.

Mr. Currie is the former Global Head of Commodities Research at Goldman Sachs, where he helped to build their commodities business. During his nearly three decades at the firm, he became one of the leading commodity market strategists on Wall Street, known for advising clients through the commodity “super cycle” of the 2000s, the shale supply shock of the 2010s, and most recently the twin shocks of the pandemic and the Russia-Ukraine war.

Mr. Currie is a graduate of Pepperdine University and holds a Master of Arts Economics and a PhD in Economics from the University of Chicago.

Economic and market views and forecasts reflect our judgment as of the date of this presentation and are subject to change without notice. In particular, forecasts are estimated, based on assumptions, and may change materially as economic and market conditions change. The Alfa Group has no obligation to provide updates or changes to these forecasts. Certain information contained herein has been obtained from sources prepared by other parties, which in certain cases have not been updated through the date hereof. While such information is believed to be reliable for the purpose used herein, The Alfa Group and its affiliates assume no responsibility for the accuracy, completeness or fairness of such information. References to particular portfolio companies are not intended as, and should not be construed as, recommendations for any particular company, investment, or security. The investments described herein were not made by a single investment fund or other product and do not represent all of the investments purchased or sold by any fund or product. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of The Alfa Group. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors.