Bonus bite: Volatility, the vote, and Aussie energy prices

Ahead of the Australian election, Scott Phillips of The Motley Fool describes how market volatility and politics impact the energy sector—from solar to coal. 

Is expanded nuclear power on the horizon? What’s the lesson from the lithium crash? What would tariffs do to oil, and what’s the ripple effect for Australia’s other fuel and energy sources?

This is a bonus clip from our latest episode “Investor’s guide to tariffs and the Aussie election”.

For more or to watch on YouTube—check out http://linktr.ee/sharedlunch

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Episode Transcript

Speaker 1 (00:00):
During over seven hundred and fifty thousand people using Chezy's
to build long term wealth and vest with no minimum
across the US, Australian and New Zealand share markets. Download
the cheesys app to get started. You're listening to a
Charsy's podcast continuing on with the election. If we just
dig into the energy sectors, one that's coming up a
bit like.

Speaker 2 (00:20):
Can you talk about about you.

Speaker 1 (00:22):
Know, what's happening there or what's going on and what
impact that could have.

Speaker 2 (00:27):
Yeah, for sure.

Speaker 3 (00:27):
So there's a couple things going with energy and the
kind of it's a bit of a mess, so you're
right to kind of call it out. In particular, we've got,
on one hand, both by the energy by the ways,
it's really big, a morphous thing because it kind of
includes lithium for batteries and coal for power stations and
oil for general use largely transportation other things.

Speaker 2 (00:45):
It's going to go energy broader, So what is that.

Speaker 3 (00:48):
So on one hand, you've got the government promising their Future
Made in Australia Fund which as part of that the
invest in local solar panel manufacturing. Now that's energy, and
the SENSUS Renewable Energy, So that that's kind of important.
You've got the opposition who are promisely take money out
of things like the Clean Energy Finance Corporation, which potentially
reduced the investment in renewables. The opposition also saying they're
going to have a policy to build at least seven

(01:08):
nuclear power plants around the country for power generation. That's
kind of going on. You've got the energy subsidies that
are currently on power bills from the current government.

Speaker 2 (01:16):
They're probably to extend that for another six months.

Speaker 3 (01:19):
The opposition saying well they will do it with fuel instead,
will reduce the fuel exercise. That means more oil and
gas being sold in Australia. So there's lots of those
pieces that are really moving all over the place. I
didn't touch on lithium. I will touch on lithium very quickly.
I think there's some lessons for lithium so on you.
And this is not the end of the story, by
the way, but I will I will talked to the
story to date, and that was people went, hey, lithium

(01:40):
equal EV's equals batteries.

Speaker 2 (01:42):
Batteries equals lithium. Therefore lithium is good if.

Speaker 3 (01:44):
EV sales grow, right, that's not actually wrong. That's entirely
logical from a demand perspective. What lots of people miss,
and I'll get back to why I'm talking about this
with energy more broadly, but lithium in particular matters as
well is what people didn't.

Speaker 2 (01:56):
The factor in was the supply response.

Speaker 3 (01:58):
So we had a boom and e boom in batteries,
boom and home batteries as mentioned that before, and then
an even bigger boom in supply.

Speaker 2 (02:05):
So we know.

Speaker 3 (02:06):
You know, there's no iron laws in economics, but one
of the closest to an iron law is the law
of supply and demand. If demand goes up, prices go
up at the given level of supply. If demand goes
up and supply goes up more, the curves shift and
I won't go through the boring economics of it, and
price actually can come down. So even though EV sales
are boomed, batteries are boomed and again I'm all for it, right,

(02:29):
but supplies grown by more, so the price is absolutely created.
So people who said and again think about thematically, I'm
by lithium because evs are going to be big.

Speaker 2 (02:36):
There's only half the story, and that's why it's.

Speaker 3 (02:38):
Really important back to energy more broadly, the other problem
with half the story we've seen go back to unfortunately
going to go back to tariffs for a second.

Speaker 2 (02:45):
The world is freaked out about the potential of a
US and all global recession.

Speaker 3 (02:48):
We know when there's economic downturns, oil prices or volumes
tend to fall because oil tends to power the global
economy at leat until we fix that properly with renewables
once and for all. But for now, at least oil
powers the global economy. When there's fears of it downturned,
guess what the oil price falls meaningfully. And so all
we've actually seen as well as all this sort of
stuff is in the energy space. Petrol prices, diesel prices

(03:10):
are coming down because the oil price is coming down
because the world's no longer sure we can use as
much as we used to if things do get tougher.

Speaker 2 (03:17):
And so you ask at the energy sector.

Speaker 3 (03:19):
My broadest fiel and energy, honestly, mate, is trying to
predict energy prices a really really, really really tough game
because you've got to predict the supply and the demand.
And again, if you don't believe me, go back three
and a half weeks and say, who predicted the oil
price would fall because Trump would unveil these massive so
called reciprocal tariffs, you know, horribly disproportioned to anything else

(03:40):
going on. And the oil price tanks, I mean maybe
three people predicted it, and I'll say predicted and again
the air quotes because they've probably predicted oil price falling
in Outher twenty five times and it hasn't happened.

Speaker 2 (03:49):
But you had to kind of have a.

Speaker 3 (03:50):
View on that, have a view on the price of
woodside patroleum for examples, that energy, or Santos or something else.

Speaker 2 (03:56):
Because no matter what they do themselves, great production.

Speaker 3 (03:59):
High no lost time, injuries, great scale, do all the
things they can do correctly, but every morning you've got
to look outside, you open open the blinds and go, oh,
what's the price today, and kind of cringe as they
check it.

Speaker 2 (04:09):
They have no control over that.

Speaker 3 (04:10):
And that's the biggest part by far, of any lithium, coal,
oil gas.

Speaker 2 (04:16):
Pick your energy source.

Speaker 3 (04:18):
It's the global market price that termines your returns, far far,
far more than then the company itself can do. And
I'm yet to find anyone who can reliably predict the
energy price to any reasonable degree to make it worth
an investment. So there are local issues.

Speaker 2 (04:32):
There are local implications for the energy sective for sure.

Speaker 3 (04:34):
I just want people to kind of make sure they
take the bigger picture, like the lithium supply and demand story.

Speaker 2 (04:39):
Government policy is one small bit of it, and it's
not a tiny bit.

Speaker 3 (04:42):
Individual companies may get those government contracts for the future
made in Australia.

Speaker 2 (04:46):
There's other things that could happen.

Speaker 3 (04:47):
Of course, nuclear power plants could be built and designed,
and there's lots of possibles. The other thing, by the way,
is if you're betting on government policy for an investment thesis,
you're probably taking more risks than you know and probably
more than you should.

Speaker 1 (04:59):
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