To the extent my superannuation fund (401k, ROTH, IRA, hard to know what people call this in other economies) is invested in oil, it goes to .. me.
Super funds in Australia, Canada, the US, are now a massive component of capital investment both in the public market and in private equity. Australia's GDP is 2.5T and the super funds are up to 4T or 5T. Thats $trillion. The super funds are bigger than the GDP of the economy they reside in!
Some funds are just venal machines in the for profit sector. Some are run by boards aligned to union sectors, I am in the tertiary education union backed fund in Australia and it's been in the top 5 performing funds for my entire working lifetime, and given me a comfortable retirement. Most of the injection of funds was from me: I paid between 9 and 12% and on occasion up to 15% of my income into this fund over a 35 year working lifetime. Its accrual is all down to my fund manager, and if they invested in oil and have secured a windfall, at the cost of the future climate risk, thats on me, albiet indirectly. 35 years at the 150+ year 6-7% return in the market, (some say this trend is even older) is several doublings over my working lifetime. Those doublings were driven in .. the market.
Me here, is 75% or more of Australia. It's not some amorphous unknown nasty corporate investor in a sharp suit, its ordinary people. Oh, the article even points out that they pay out on insurance and capital costs rebuilding the exploded ships and production facilities. Guess who makes money? Thats right, the superannuation funds invested in the re-insurance market (Warren Buffett's favourite!) or in construction companies, public or private. So.. thats me again.
The money comes to us. Some of us may be in Saud. Sure. The Saudi state pays a huge stipend to its citizens. Some of us may be in Norway. That national investment fund is amazing. Why do you think Norway is now almost completely cut over to private EV drivers?
I'd love to ideate the hateful oil companies as the victors here but the thing is, they don't simply act like Smaug and sit on a pile of gold coins. Thats not held to be useful by them and their peers. They do shave off FAR TOO MUCH to swan about in those aforementioned sharp suits, but enough of the fat trickles into my hands, to keep me in the manner to which I am accustomed, as a retiree.
I'm as complicit, and so are "you" for many people reading this.
> It's not some amorphous unknown nasty corporate investor in a sharp suit, its ordinary people.
That 'nasty' guy usually serves investors, instead of investing his own money. For all he cares, these investors might be widows and orphans.
Btw, Singapore's sovereign wealth funds are also big players in basically the same space. Their revenue contribution to the national budget is bigger than any single tax we levy.
I agree - they're measuring completely different properties of different populations of things, over completely different time horizons. Comparing them doesn't seem very useful.
Market caps are roughly expected future earnings, discounted back to give some net present value. They're expectations about the profitability of businesses, with expected profits accumulated over forecasts decades into the future. Market caps ignore privately held businesses, small businesses, state owned businesses & economic activity, economic output that might be happening at a household level, etc.
GDP is some peculiar measure of a country's economic output, over one year. It doesn't care if the economic activity is profitable or not & it doesn't care if the surplus of the economic activity is extracted by public companies or not. It's not forward-looking & based on expectations.
all that said, ggm has a fair point that individual investors & retirees with share portfolios directly benefit from the profits of companies whose economic activities may not be particularly pro-social & beneficial to the world. it's similar for climate change -- easy to point the finger at the energy producer, the big dirty brown coal plant. harder to point the finger at the demand side of the same equation - much of which is household demand. but both the individual end consumer households and the energy producer & everyone else involved in the value chain benefit out of the trade, even if the trade is net-negative for the world if we were to properly account for the externalities (e.g. polluting the atmosphere with CO_2 pushes the costs to everyone on the planet, current & future generations, not just the folks benefiting from the trade).
In the book Catch-22 character Milo Minderbender helps the enemy conduct an aerial attack on his own base. He successfully defends his actions by pointing out how profitable his syndicate is. “Everyone gets a share.”
As an Australia, i agree with most of what you say, but you have skipped some important parts of the cycle. Firstly there are many hands along the way asking for their cut. This is why everything is going up so quickly, because there are so many hands, who dont add value but tax the process.
A few public servants in Australia, Norway and the kingdom of saud doesn't translate to all the people are benefiting. Nice try to shift the blame to 8.5 billion people instead of oil billionaires and corporations. Old people have set up systems to transfer wealth from future generations. The corporate profits are mirror images of debt: https://www.hussmanfunds.com/wp-content/uploads/comment/mc25...
US has $40T federal debt (+state, +municipal, +household) and probably 100T+ debt worldwide which the future generations have to pay.
> US has $40T federal debt (+state, +municipal, +household) and probably 100T+ debt worldwide which the future generations have to pay.
Future US citizens are clearly not going to repay the debt, simply because they can't feasibly pay that much back in real terms. They cannot achieve the impossible. The magnitude of the debt is far beyond what it makes sense for the US to make good on.
Future generations of the US won't be able to borrow on such favourable terms (ie, people will stop donating to the US cause) and all the capital investment that would have happened in the US to power their consumption happened in China instead - but the effects of the debt won't look like repaying anything.
You don't repay in real terms, you repay in nominal terms. That's priced in. The US isn't going to straight up default but it'll pay you back with inflated currency.
A few public servants in Australia? I'm not sure what you mean?
Superannuation may have been limited to a public servants and employees of large corporations in the 1970s, but was expanded to blue collar workers in the 1980s (see industry super funds), and mandatory for all employers in the 1990s. Almost every worker in Australia has a superannuation fund. Whether a given person's fund is invested in fossil fuels is another questio (mine has a radio button to choose green only investments or not).
that is fundamentally self-centered, the way it is put there. Capital is under the control of certain companies and their decisions are binding financially.. it starts there AFAIK. Upon that stable core is built layer upon layer of related business including things you mention. A framing that the business practices are 'on you' wears thin quickly while simultaneously taking up airspace from very difficult business topics
I wish I could downvote this, because what a bunch of baloney! Unless you have hundreds of thousands, and to be precise millions, invested in oil already, you're not going to see any significant changes to your portfolio. The rich will get richer playing the market, the regular folk are left out as always paying the price.
Big US oil companies like Exxon, Chevron, Conoco, et al are mostly owned by mutual funds and index funds. So it really is "regular folk", though of course not everyone has the same size 401k.
Superannuation in Australia is most typically a not-for-profit mutual fund. So .. yes. Most Australians invest in "industry super" which means the union backed nfp model.
> So it really is "regular folk", though of course not everyone has the same size 401k.
Depends on how you define "regular folk".
40% of American adults don't have any retirement savings account at all. And entirely unsurprisingly whether they do or not correlates extremely strongly with income/wealth.
So one could easily claim that the further from actual "regular folk" you are the more likely you are to benefit.
Anyone can decide to put their spare cash or retirement funds into oil stocks, but I don't think that it's a recipe for getting rich. Renewable energy is rapidly replacing oil, and if the Strait of Hormuz opened and the Ukraine war ended, oil prices would sink and you would end up with huge losses.
Nobody really gets rich by playing the market. You get rich by working hard and/or starting your own business, and investing in a diversified portfolio of index funds and dividend paying blue chips.
The money goes around and around. Money ultimately is just a tool to allocate resources. Higher prices mean the resource is less available than the demand, so it needs to be allocated more carefully (higher prices tend to make people more careful with their choices).
It's simpler: people who were long oil make money (on paper) and those who were short oil lose money (on paper).
You were long oil if you are an oil producer, or, e.g., if you owned oil futures. You were short oil if you are an oil consumer, or, e.g., if you had sold oil futures. If you are both (e.g., airlines might hedge future oil consumption by buying futures, and producers might hedge future production by selling away their future production), then you need to net it out across the futures curve.
Price responses to supply shocks in theory serve to allocate resources appropriately (e.g., if your consumption did not matter that much, you might curtail it); if another person's consumption is more productive (i.e. profitable), then they're likely to eat the input cost and still buy it. In the long run, you might hope that high prices lead to more investment in producing the scarce good, or in more hedging activity to prevent future harms. The net effect of (long) hedging activity is generally to slightly increase the future price because folks buy futures / futures options, and market makers, in addition to selling the option, buy the underlying to remain market neutral. This potentially increases future supply because it can, in theory, push up the futures price, or estimates of future price, which can make new resource extraction economical.
Unfortunately, today, given the degree of inequality, it is mostly poor people whose consumption is curtailed when there are supply shocks. This is consistent with the above interpretation: the implication of wealth inequality is that the poor people matter less and are less productive to the capitalist machine. As a real example of this, the oil price would likely be higher even, if the oil consumption of Southeast Asian countries had not decreased because they could not afford the higher prices. This is the great thing about inflation in a highly unequal society: it is partially tempered because demand goes away as prices rise.
When oil prices spike, producers may choose to be even more benevolent (bribes / paybacks) to politicians / administration who created the means which caused the price hike.
Having not read the article yet: it goes to the people still able to provide you oil. Some of which were already providing you oil and get it as almost pure margin, some of which couldn’t afford to provide you oil at a lower price point.
Super funds in Australia, Canada, the US, are now a massive component of capital investment both in the public market and in private equity. Australia's GDP is 2.5T and the super funds are up to 4T or 5T. Thats $trillion. The super funds are bigger than the GDP of the economy they reside in!
Some funds are just venal machines in the for profit sector. Some are run by boards aligned to union sectors, I am in the tertiary education union backed fund in Australia and it's been in the top 5 performing funds for my entire working lifetime, and given me a comfortable retirement. Most of the injection of funds was from me: I paid between 9 and 12% and on occasion up to 15% of my income into this fund over a 35 year working lifetime. Its accrual is all down to my fund manager, and if they invested in oil and have secured a windfall, at the cost of the future climate risk, thats on me, albiet indirectly. 35 years at the 150+ year 6-7% return in the market, (some say this trend is even older) is several doublings over my working lifetime. Those doublings were driven in .. the market.
Me here, is 75% or more of Australia. It's not some amorphous unknown nasty corporate investor in a sharp suit, its ordinary people. Oh, the article even points out that they pay out on insurance and capital costs rebuilding the exploded ships and production facilities. Guess who makes money? Thats right, the superannuation funds invested in the re-insurance market (Warren Buffett's favourite!) or in construction companies, public or private. So.. thats me again.
The money comes to us. Some of us may be in Saud. Sure. The Saudi state pays a huge stipend to its citizens. Some of us may be in Norway. That national investment fund is amazing. Why do you think Norway is now almost completely cut over to private EV drivers?
I'd love to ideate the hateful oil companies as the victors here but the thing is, they don't simply act like Smaug and sit on a pile of gold coins. Thats not held to be useful by them and their peers. They do shave off FAR TOO MUCH to swan about in those aforementioned sharp suits, but enough of the fat trickles into my hands, to keep me in the manner to which I am accustomed, as a retiree.
I'm as complicit, and so are "you" for many people reading this.
That 'nasty' guy usually serves investors, instead of investing his own money. For all he cares, these investors might be widows and orphans.
Btw, Singapore's sovereign wealth funds are also big players in basically the same space. Their revenue contribution to the national budget is bigger than any single tax we levy.
You are comparing the absolute value of something versus yearly performance.
Market cap vs revenue.
Market caps are roughly expected future earnings, discounted back to give some net present value. They're expectations about the profitability of businesses, with expected profits accumulated over forecasts decades into the future. Market caps ignore privately held businesses, small businesses, state owned businesses & economic activity, economic output that might be happening at a household level, etc.
GDP is some peculiar measure of a country's economic output, over one year. It doesn't care if the economic activity is profitable or not & it doesn't care if the surplus of the economic activity is extracted by public companies or not. It's not forward-looking & based on expectations.
all that said, ggm has a fair point that individual investors & retirees with share portfolios directly benefit from the profits of companies whose economic activities may not be particularly pro-social & beneficial to the world. it's similar for climate change -- easy to point the finger at the energy producer, the big dirty brown coal plant. harder to point the finger at the demand side of the same equation - much of which is household demand. but both the individual end consumer households and the energy producer & everyone else involved in the value chain benefit out of the trade, even if the trade is net-negative for the world if we were to properly account for the externalities (e.g. polluting the atmosphere with CO_2 pushes the costs to everyone on the planet, current & future generations, not just the folks benefiting from the trade).
Let’s forget about the people who did set up the system, and do control and understand it.
Very reasonable. Very logical and sensible.
US has $40T federal debt (+state, +municipal, +household) and probably 100T+ debt worldwide which the future generations have to pay.
Fossil fuel is unsustainable without substantial subsidies from Govts. Global Fossil Fuel Subsidies Reached $7 Trillion in 2022, an All-Time High: https://e360.yale.edu/digest/fossil-fuel-subsidies-2022
More than a century of subsidies and yet not profitable on its own.
Future US citizens are clearly not going to repay the debt, simply because they can't feasibly pay that much back in real terms. They cannot achieve the impossible. The magnitude of the debt is far beyond what it makes sense for the US to make good on.
Future generations of the US won't be able to borrow on such favourable terms (ie, people will stop donating to the US cause) and all the capital investment that would have happened in the US to power their consumption happened in China instead - but the effects of the debt won't look like repaying anything.
A few public servants in Australia? I'm not sure what you mean?
Superannuation may have been limited to a public servants and employees of large corporations in the 1970s, but was expanded to blue collar workers in the 1980s (see industry super funds), and mandatory for all employers in the 1990s. Almost every worker in Australia has a superannuation fund. Whether a given person's fund is invested in fossil fuels is another questio (mine has a radio button to choose green only investments or not).
https://www.unisuper.com.au/investments/our-investment-optio...
It's diversified, but the biggest holdings tend to be in Australian Banks, BHP and the "big" US tech stocks.
Depends on how you define "regular folk".
40% of American adults don't have any retirement savings account at all. And entirely unsurprisingly whether they do or not correlates extremely strongly with income/wealth.
So one could easily claim that the further from actual "regular folk" you are the more likely you are to benefit.
Nobody really gets rich by playing the market. You get rich by working hard and/or starting your own business, and investing in a diversified portfolio of index funds and dividend paying blue chips.
Yeah, right
Exxon is up 40% year-to-date (YTD), BP is up 20% YTD while SNP500 is up 12% YTD.
So I'm not even sure the premise of this tangent is correct; oil stocks aren't shown to be the recipient of the current price spike.
But it's not sustainable in the medium term.
You think this is the only basis of investment in a large fund? You think they don't make plays which respect this fact, in their risk profile?
Come on now
You were long oil if you are an oil producer, or, e.g., if you owned oil futures. You were short oil if you are an oil consumer, or, e.g., if you had sold oil futures. If you are both (e.g., airlines might hedge future oil consumption by buying futures, and producers might hedge future production by selling away their future production), then you need to net it out across the futures curve.
Price responses to supply shocks in theory serve to allocate resources appropriately (e.g., if your consumption did not matter that much, you might curtail it); if another person's consumption is more productive (i.e. profitable), then they're likely to eat the input cost and still buy it. In the long run, you might hope that high prices lead to more investment in producing the scarce good, or in more hedging activity to prevent future harms. The net effect of (long) hedging activity is generally to slightly increase the future price because folks buy futures / futures options, and market makers, in addition to selling the option, buy the underlying to remain market neutral. This potentially increases future supply because it can, in theory, push up the futures price, or estimates of future price, which can make new resource extraction economical.
Unfortunately, today, given the degree of inequality, it is mostly poor people whose consumption is curtailed when there are supply shocks. This is consistent with the above interpretation: the implication of wealth inequality is that the poor people matter less and are less productive to the capitalist machine. As a real example of this, the oil price would likely be higher even, if the oil consumption of Southeast Asian countries had not decreased because they could not afford the higher prices. This is the great thing about inflation in a highly unequal society: it is partially tempered because demand goes away as prices rise.
Oh, right.
Edit: yup
Shelley Duvall was amazing in Popeye.