Oil Price Surges, Large Investors Holding On
Posted on 10/09/2023
Crude oil futures are rising today following the attacks on Israel which includes the taking of hostages and several coordinated incursions. It had risen to US$ 115 in May ahead of the busy driving season, but fell below US$ 80 before bouncing back. With oil up over 3% on the day, a barrel trades at US$ 86. The question is whether the intermediate term decline will be stopped by a possible disruption of supply.
Oil has been contentious for certain public and university investors, but management has often fought back for the right to own oil. California’s pension funds own US$ 15 billion in non-renewable energy investments. New York’s pension funds argued ESG enthusiasts were “wasting the court’s time,” when faced with a lawsuit pushing them to divest. “Their legal theory is premised on the radical, absurd notion that courts may force public pension funds to invest in a particular industry if it performs well enough.” The case is Wong et al. vs. New York City Employees’ Retirement System.
For a particular example of strong returns in oil, we could look to ConocoPhillips. ConocoPhillips trades at US$ 120, it has increased nearly four times from the lows of 2020. Even strongly left-leaning jurisdictions such as Oregon are having a hard time moving away from oil. Oregon Public Employees Retirement Fund dumped nearly half its ConocoPhillips stake, but retains US$ 19 million.
