Latest / Energy Economics with Fexingo: Oil Prices, Renewables, and the Cost of Power / Why Oil Is Rising as Clean Energy Stocks Crash in June 2026
Transcript
- Lucas: It is June 8, 2026, and the energy market is telling two completely different stories right now. On one side, crude oil is climbing — WTI is at $94.63, up almost 5 percent from a week ago. On the other side, clean energy stocks are getting wrecked. Luna: Yeah, the numbers are brutal. The Invesco Solar ETF, TAN, is down 10 percent in five days. Enphase is off 12 percent. First Solar dropped nearly 8 percent. Lucas: Exactly. And this isn't just a one-day panic. The selloff has been building for weeks. ICLN, the broader clean energy ETF, is down 7.5 percent over the same period. So we've got oil pushing higher and solar crashing — the opposite of what a lot of people expected when we talked about the 'energy transition' narrative. Luna: And the big catalyst this morning is obvious — Iran and Israel exchanged strikes over the weekend, threatening the ceasefire. That's pushing Brent toward $98. Lucas: Right. Geopolitical risk is front and center. But if you look past the headlines, there's a structural story underneath this divergence that's more interesting. It's about US oil exports, domestic supply dynamics, and a valuation reckoning in renewables. Luna: Let's start with oil. WTI at $96 — that's up from $91 just a week ago. But it's not just the Middle East, is it? Lucas: No. The Middle East is the spark, but the fuel is US oil export capacity. In our last episode, we talked about the growing financial cost of export infrastructure. Well, now that capacity is being tested. US crude exports hit a record earlier this year, and that's pulling domestic supply tighter. Even with production near all-time highs, the export drain means less oil left for US refineries, which supports prices. Luna: So you've got a double whammy: geopolitical premium from the Middle East and a structural bid from US exports. That explains WTI near $95. Lucas: Exactly. And look at the energy sector ETFs. XLE, the big energy fund, is actually up half a percent this week. Exxon is flat to slightly up, Chevron up 0.8 percent. ConocoPhillips up 1.3 percent. The oil producers are holding up fine. The pain is concentrated in clean energy. Luna: Which brings us to the solar selloff. Why now? I mean, oil at $96 should theoretically make renewables more competitive on cost. Lucas: You'd think so. But the market is focused on a few things. First, interest rates. The ten-year breakeven inflation rate is at 2.36 percent — basically flat. But real rates have crept up, and clean energy stocks are long-duration assets. Their future cash flows get discounted more heavily when rates are higher or sticky. Luna: Right, because solar projects require a lot of upfront capital. Higher rates mean higher financing costs. Lucas: Exactly. And there's a second factor: valuation. Aswath Damodaran — the 'Dean of Valuation' — was on CNBC this weekend saying he's not buying SpaceX because it's 'too richly priced.' That same sentiment is creeping into solar. First Solar was trading at over 20 times forward earnings earlier this year. Enphase at 30-plus. When the macro environment gets uncertain, those multiples compress fast. Luna: But NextEra Energy, which is a big utility with a huge renewable portfolio, is up 3.4 percent this week. So it's not a blanket selloff. Lucas: That's the key distinction. NextEra is a regulated utility. It has predictable earnings, a dividend, and its renewable projects are backed by long-term contracts. That's different from pure-play solar manufacturers or residential installers like Enphase, which depend on consumer demand and discretionary spending. Luna: So the market is punishing the growth names and rewarding the stable cash flows. Lucas: Exactly. And that's a pattern we've seen before. In 2022, when rates rose, clean energy stocks got crushed while utilities held up. This time, it's even more pronounced because oil is rallying at the same time, which makes the divergence feel more dramatic. Luna: What about the geopolitical angle specifically for clean energy? The Iran-Israel strikes — does that change the calculus for renewables at all? Lucas: Short term, no. Geopolitical risk tends to benefit oil and gas directly — it's a supply shock for crude. For renewables, the impact is indirect and delayed. Higher oil prices might eventually make solar more attractive, but the market is too busy worrying about rates and valuations to price that in. Luna: So is this a buying opportunity in solar? Or is the selloff rational? Lucas: I think it depends on your time horizon. If you believe interest rates will come down in the next six to twelve months, then the selloff in names like First Solar and Enphase looks excessive. But if rates stay higher for longer, the compression could continue. The Damodaran comment is a reminder that valuation matters, even for 'green' assets. Luna: And what about oil? Is the rally sustainable? Lucas: That depends largely on the Middle East. If the ceasefire collapses entirely and we see a sustained conflict, Brent could easily test $105. But if tensions de-escalate, the export story is still bullish for US crude relative to global benchmarks. WTI might stay in the low $90s even if Brent falls back. Luna: So you're saying the US oil export dynamic is a structural support, not just a geopolitical blip. Lucas: Exactly. And that's a theme we'll be watching all summer. Speaking of which — you know, if walking through the economy with us has made something click, there's a simple way to support the show. It's at buy me a coffee dot com slash fexingo. No pressure at all, but that's what keeps this ad-free. Luna: Yeah, it's literally the price of a coffee. If today's episode was worth that to you, that's the link. And it genuinely helps. Lucas: So back to the divergence. One more data point I want to highlight: natural gas. Henry Hub is at $3.19, down 0.8 percent this week. That's actually a headwind for renewables because cheap gas makes gas-fired power plants more competitive. But utilities like NextEra are still buying gas plants, as we discussed in episode 31. So the narrative isn't simple. Luna: Right. It's not a binary oil vs solar story. There's nuance within each sector. Lucas: Exactly. And that's the takeaway for today. Oil is up because of geopolitics and exports. Solar is down because of rates and valuations. But next week, those drivers could shift. We'll keep tracking it. Luna: Sounds good. See you next time. Lucas: Take care.