Rinehart leads Forrest in energy race

THERE is something seductively simple about a two-horse race because most people believe there can only be one winner.

In the ‘energy of the future’ contest between Perth billionaires Gina Rinehart and Andrew Forrest, both might eventually emerge as winners.

Mr Forrest’s horse in the energy race is called hydrogen, not a sprinter, but possibly a stayer suited to a long run.

Mrs Rinehart is riding a sprinter called lithium, perhaps as a replacement for her ageing nag called fossil fuels, which runs on oil and gas.

Both are betting heavily on a future of forced changes in the way the world is powered, and both are funding those moves with money generated by Western Australia’s fading economic star, iron ore.

If there are differences between hydrogen and lithium it can be found in the timing of their evolution.

Lithium is here and now. Hydrogen promises to be big, eventually ... maybe.

For most investors there is a common signal being sent by two remarkably successful WA businesspeople, that the easiest money to be made over the next few decades will be in energy – even from old faithful, fossil fuels.

Supply and demand, the normal driving force behind major business decisions are playing a role in the energy rush but the more important element is governments going green, whether they like it or not.

Community fear, real or imagined, of a world becoming much hotter is egging on politicians to pass increasingly tough laws to limit the use of fossil fuels, leading to bans on coal, oil and gas.

One result of the changes is higher living costs and a degree of inconvenience such as being forced to switch from gas to electrical appliances while hoping that government-controlled power supply systems can produce enough electricity.

Laws banning petrol and diesel-powered vehicles will also force everyone to buy an electric vehicle whether they can afford it or not.

For Mr Forrest, Mrs Rinehart and several other very rich people unconcerned about living costs, the government mandated changes to energy supply are an invitation to make their next fortunes.

Mr Forrest has attracted most media attention so far because he has not been able to align the views of all the senior managers at his Fortescue Metals Group with the vision he has for hydrogen.

Small investors who bought FMG shares in the belief they were investing in an iron ore mining company are discovering their money is being spent on Mr Forrest’s hydrogen plans, which might be hugely profitable one day, just don’t ask when.

Mrs Rinehart is more focused on making quick profits from her energy interests, oil and gas today, with lithium being added tomorrow – and perhaps even with a dash of uranium, a fuel which also interested her late father, Lang Hancock.

For WA, the energy investment plans of the two billionaires, along with secondary players in the mining game, such as Chris Ellison from Mineral Resources, point to a very different future to the era of iron ore, which is fading with China’s slowing demand for steel.

But the important message from watching how the ultra-rich are building on their billions is to buy anything exposed to energy, even oil and gas stocks, because governments might be making ill-conceived changes as they rush to kick fossil fuels out before there’s proof of alternatives working as promised.

Future jobs

What’s happening in energy is also the clearest message possible for students about where the high-paid jobs will be in the future; they will be in mining, and to see why, consider what’s happening in the home of oil, the US.

Shifting the US off a heavy fossil fuel diet has started, with laws tightening access to exploration acreage and government spending designed to encourage the local production of energy metals such as copper, nickel and lithium.

The problem, which investment bank Morgan Stanley identified, is that the US has allowed its mining industry to wither, along with the skills required to discover and develop the mines it wants if it is to wean itself of imports, especially those from China.

According to the bank, natural resources (mining) as a share of the US economy has fallen from more than 3 per cent in 1980 to less than 0.5 per cent today even as mineral imports reached a record high.

More interesting from a career perspective, the number of geology and earth science graduates in the US has fallen from 7,700 a year as recently as 2018 to 5,900 today.

Fewer professionals being asked to produce more energy metals is a recipe for a shortage and leads to the type of salary packages that used to be offered in oil and gas, where even the cook on an offshore oil rig could earn more than $100,000 a year.