Dirty big secret: financial performance of fossil fuel companies
|Dirty big secret: financial performance of fossil fuel companies||819.66 KB|
Amid the stockmarket turmoil of 2020, fossil fuel companies have performed worse than the wider market. The S&P ASX 300 Energy index is down 48% the first quarter of 2020 compared to 23% for the ASX 300. Contributing factors include COVID19 and surging supply from the oil price war between Russia and Saudi Arabia.
However, the underperformance of fossil fuel companies is not limited to early this year. Fossil fuel companies have performed worse than the wider market over the entire last decade.
In fact, the fossil fuel dominated ASX 300 Energy sector performed worse than all other sectors over the last decade.
The poor performance of fossil fuel companies is probably surprising to most Australians, who are routinely told by industry and political leaders that coal is the “bedrock” of Australia’s prosperity, or that gas will “fire” the recovery from COVID-19.
In fact, comparison of the fossil fuel-dominated ASX 300 Energy Index to the whole ASX 300 Index understates the underperformance of fossil fuel companies. As fossil fuel companies are in the ASX 300, they drag down its growth with their index’s losses. This paper derives a an ex-Energy index, to allow comparison between ASX 300 indices with and without fossil fuels. In February 2020, the ASX 300exEnergy was 19 points higher than the ASX 300 including energy. At the end of the first quarter the loss was 17 points.