For several months now, our chief investment strategist, Adam O’Dell, has touted the idea that both sides in the Energy War — “old” sources such as oil and “new” renewable sources such as solar — stand to profit.
Here’s what Adam wrote in April:
Anyone picking sides and choosing to invest in just one side of this war is missing the big picture. Untold billions of dollars are pouring into both industries simultaneously. At the same time, the demand for any energy, no matter its source, is accelerating.
No truer words have been spoken.
I’ve gotten my hands on some research that proves Adam’s idea that both sides of the Energy War will come out on top.
Today, I’m going to show you irrefutable proof of this idea, illustrating how investing in both is a way to profit from this ongoing “conflict.”
Lithium Leads the Way
Because of its low density and weight, lithium is used for rechargeable batteries like the ones you find in your laptop, smartphone or electric vehicle (EV).
It’s one of the most important metals in the Energy War because of its uses in EVs and other energy storage batteries.
It explains the massive jump in lithium consumption expected in the coming years:
From 2017 to 2027, S&P CapIQ expects the annual consumption of lithium will jump 566.7%!
Recently, geologists discovered a massive lithium deposit along the Nevada-Oregon border that will dwarf deposits found in some of the leading lithium-producing countries in the world — like Chile and Argentina.
While mining for lithium is profitable, it is expensive. It costs between $5,000 to $8,000 to produce one ton of lithium. For reference, a profitable mining cost for West Texas Intermediate crude oil in the Texas Permian Basin is around $35 a barrel for existing wells. It’s $54 for new wells.
It takes about 7.5 barrels of oil to equal a ton. At $35 a barrel, it costs around $262.50 to produce one ton of crude oil.
Here’s where both sides of the Energy War win.
Expertise Means More Efficient Lithium Mining
A recent report by S&P Global Commodity Insights reinforced Adam’s main point to the “both sides” argument in the Energy War.
Oil and gas companies with their deep pockets and extensive mining expertise can disrupt the lithium mining industry.
ExxonMobil Corp. (NYSE: XOM) just spent $100 million for the rights to lithium brine assets in Arkansas to couple with another partnership for lithium assets the company has in the state.
It makes a lot of sense for big oil to invest in lithium extraction. If for no other reason than the future supply of crude oil:
After a peak in 2027, S&P Global projects a significant downturn in crude oil production into 2050. By then, production levels are expected to be back at 2010 levels.
This will hit the bottom line of these cash-rich oil and gas companies. So pivoting now to an energy source with massive future potential makes sense.
Another benefit to Big Oil tapping into the lithium market is time.
It can take a decade to get a lithium mine planned, permitted, funded and built. But oil and gas producers can take off a chunk of that time by tacking lithium extraction to existing operations.
Doing that requires fewer regulatory approvals than establishing a new mine.
Bottom line: The idea of oil and gas producers jumping into lithium mining is new … and disruptive.
These companies can make lithium mining more efficient and cheaper. It also goes a long way toward meeting the increased projections in lithium demand in the process.
That supplies the EV and energy storage markets with more lithium to build batteries. And traditional energy companies get to pad their already strong bottom lines.
As Adam said … both sides win.
And if you want to make sure you’re invested in Adam’s highest-conviction energy storage stock recommendations, click here to watch his “Infinite Energy” presentation now.
Until then…
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets