Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

GMO’s Grantham: the cracks in the US fracking story

1 Comment
GMO’s Grantham: the cracks in the US fracking story

Costs surrounding the exploration and exports of fracking are not sustainable for the environment or US growth, according to Jeremy Grantham, co-founder of GMO.

Fracking, which injects chemicals under high pressure into rock to release oil and gas, is seen as an alternative energy source for the US. Moreover it is seen to have helped the economy by putting downward pressure on energy prices, creating thousands of jobs and brought new business hubs to many parts of the US.

Whilst this boom may help to bring energy prices in the US down, the country may lose its competitiveness when it tries to export to overseas markets, the internationally famous value investor wrote in his latest quarterly investor update.

‘Natural gas is a local market, so local that Japan can be paying $12 per MCF while we, with our new fracking supplies, pay only $4 or so, vastly to the competitive advantage of our chemical industry and other energy-intensive industries,’ said Grantham.

‘However, if we tried very hard, we could mess up this splendid advantage: we could ship our gas overseas.’

The benefit of the premier fossil fuel would be wasted in shipping costs as well as potentially making the US less competitive, according to Grantham.

‘Exporting our natural gas would also take a big bite out of the relative cost advantage of a large slice of US industry', he wrote.

Media coverage on fracking has more recently drawn on harmful environmental effects on the planet as well as disruption for local communities living near exploration sites.

‘Emissions, for whatever reason, have not been carefully monitored. It would be nice to know how fast we are roasting our planet.’

Whilst value investor is sceptical on the fracking sector, he says that metals, phosphate and grains will move much higher over future decades with adverse consequences for the poorest 20% of the global population.

Grantham is positive for electric cars, most notably the Tesla cars, and renewable resources in general as he points to targets made by the Chinese government to reduce pollution.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Sam Vecht: the best opportunities in frontier markets

Sam Vecht: the best opportunities in frontier markets

Blackrock's Vecht evaluates frontier markets and explains where he sees the opportunities

Play Where A-rated Pattullo is finding the best bond opportunities

Where A-rated Pattullo is finding the best bond opportunities

Henderson Global Investors head of retail fixed income explains how he is managing his fund against the surprise current monetary policy divergence.

1 Comment Play Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Taxicab Tenner: Allianz Global Investors' AA-rated Simon Gergel

Our much anticpated new series is here! We hand a black cab driver a tenner and grill the manager of the 125-year Merchants trust until the meter runs out.    

Your Business: Cover Star Club

Profile: meet the man building Towry into an £11bn giant

Profile: meet the man building Towry into an £11bn giant

As a former engineer who worked on Hong Kong International Airport, Rob Devey is not afraid of taking on major projects

Wealth Manager on Twitter