Are ASX green energy shares losing their appeal amid rising oil and gas prices?

As traditional energy stocks soar, we take a look at what that means for ASX renewables.

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Key points

  • The S&P/ASX 200 Energy Index has been the best performing sector over the past month
  • The Woodside share price has increased by a whopping 21% during that time
  • BlackRock's Ben Powell believes that despite current trends, the future of the renewable energy sector is bright 

As the tensions in Europe continue to increase due to the Russian invasion of Ukraine, so do global oil and gas prices.

In fact, according to Trading Economics, the price of WTI Crude oil jumped to an 11-year high yesterday, hitting more than $112 per barrel.

Meanwhile, in order to regulate prices, the United States and a number of other countries have agreed to release up to 60 million barrels of emergency oil reserves.

So what does this mean for renewable energy companies?

Let’s take a look…

Traditional fuel sources skyrocket

Over the last month, the S&P/ASX 200 Energy Index (ASX: XEJ) has been the best performing sector on the ASX, increasing by 12.75%, with the S&P/ASX 200 Materials Index (ASX: XMJ) coming in second.

At time of writing, the energy sector is up 3.2% so far today.

And in correlation, many traditional fossil fuel companies have been benefitting from the oil and gas price hikes. For example, natural gas giant Woodside Petroleum Limited (ASX: WPL), has seen its share price climb by about 22% over the past month. In fact, the Woodside share price has hit a new 52-week high today of $31.99, continuing to climb after yesterday’s milestone.

Similarly, the Whitehaven Coal Ltd (ASX: WHC) share price has hit a new 52-week high today of $3.95. Over the last month, its shares have increased by around 40%.

ASX renewable energy shares not so green

On the other side of the fence, a handful of ASX renewables shares haven’t seen the same price gains.

Energy, transport and social infrastructure company Infratil Ltd (ASX: IFT) has seen its shares lift by around 4.8% over the past month. They have also risen by 12.5% over the past 12 months.

It’s been a contrasting tale for two other ASX renewable energy shares. Contact Energy Limited (ASX: CEN) shares are trading just over 4% higher over the past month, whereas the Mercury NZ Ltd (ASX: MCY) share price has slipped 0.37%.

As these price movements are significantly lower than fossil fuels shares, some investors may be concerned their environmental, social, and governance approach to investing (ESG) may be coming at the expense of potential profits.

Investors wanting renewable change

However, despite increased demand from traditional fuel sources, some investors are remaining positive about seeking climate change solutions.

Following Woodside’s climate report and future target report released yesterday, the Investor Group on Climate Change (IGCC) released a report today, calling these targets “often inadequate, or hard-to-assess”.

IGCC director of corporate engagement Laura Hillis said:

For the first time, public companies have a clear and comprehensive picture of what investors want in businesses’ plans to get ready for a net zero economy. Australia’s biggest superannuation and investment funds have made their expectations very clear, and we think businesses will appreciate that.

This guide should help raise the bar for Australian businesses as they seek to align with the expectations of the market in a rapidly decarbonising world.

Renewable energy expected to rebound

As reported by The Australian Financial Review on Wednesday, BlackRock Investment Institute chief regional strategist Ben Powell says the renewable energy sector is brighter than ever. He suggests the current unstable energy situation instead symbolises a need to transition to clean energy solutions.

This energy transition is ongoing and if anything, some of the vulnerabilities have been made very clear in the last few weeks, and the importance of the investment into the energy transition infrastructure is even clearer.

It’s not only a green issue, but also a broader supply issue now. We would see this as an accelerant to the transition towards energy sources of the future because energy sources of the past have shown to be fraught with challenges un the last few weeks.

With that in mind, investors will no doubt be keeping a keen eye on the evolving situation in Europe, and the effect it has on both traditional and renewable ASX energy shares.

Motley Fool contributor Alice de Bruin has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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