Wed. Nov 30th, 2022

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The dicey economics of investing in oil during Covid-19

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The partner at Capital Group Cos. liquidated $1 billion in oil and gas stocks as Covid-19 spread around the globe in February, according to regulatory filings. Mr. Hernandez said he suspected the expansion of the new coronavirus in Italy was about to crush global demand for gasoline, diesel and jet fuel—and with it, any near-term thesis for investing in oil companies. For Mr. Hernandez, the future of fossil-fuel investing depends on the virus and consumer behavior.

Adam Waterous, a Canadian private-equity investor, looked at the same circumstances and came to the opposite conclusion: This was the time to buy. Demand will eventually bounce back, he said, and when it does, prices will spike sometime later this decade. He backed up that conviction in July when his Waterous Energy Fund purchased a big stake in an oil sands company.

“There is absolutely a stigma about investing in oil and gas,” Mr. Waterous said. “It hasn’t been a sexy industry for a while.”

The question of whether to invest in oil and gas has become a polarizing issue in the world of money management. Even before the pandemic sapped the world’s thirst for fuel, the future of the fossil-fuel industry was already under threat due to the rise of electric cars, the proliferation of renewable energy and growing consciousness about the long-term impact of climate change.

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