The oil industry is in a terminal decline, hedge fund manager James Jampel told Bloomberg on Friday, noting that this year’s rise in oil stocks has been “the biggest dead-cat bounce in history.”
Jampel, who manages the HITE Carbon Offset hedge fund that aims to profit from decarbonization by “shorting decarbonization losers”, is extremely bearish on oil, despite the 33-percent rise of the S&P’s energy index this year.
The oil industry will be the loser of the energy transition, says Jampel, whose $187-million hedge fund is focused on shorting the most overvalued and vulnerable stocks in the carbon value chain, such as producers, transporters, marketers, processors, and users of oil, natural gas, and coal.
“Industries where volume is declining, where demand is declining, have a lot of trouble making money,” Jampel told Bloomberg in an interview published on Friday.
According to the hedge fund manager, nothing can save oil as the energy transition will only accelerate from here thanks to improving technologies for alternative energy sources.
Despite being short on oil, Jampel isn’t long on renewable energy and renewable assets.
“The reason we don’t do that is because that kind of fund would be far, far too volatile,” the hedge fund manager told Bloomberg.
Jampel’s hedge fund is betting that the broader market will outperform old energy.
This year, inflows into U.S. large-cap energy funds have jumped as oil demand started to recover and oil prices reflected this recovery. Last week, the Energy Select Sector SPDR ETF (NYSEARCA:XLE) saw the fourth highest inflows into U.S. large-cap funds at $1 billion.
Shares in several U.S.-based oil firms have provided more than 100-percent returns so far this year, excluding dividends. The five top returns were Antero Resources Corporation with 206.6% year-to-date share return as of last week, Range Resources Corporation with 182.8%, Continental Resources with 157.5%, Magnolia Oil & Gas Corporation with 136.7%, and PDC Energy with 114.6%.