This was the by-line in the Bloomberg article “Europe Faces Bleak Winter Energy Crisis Years in the Making” posted September 18, 2021. How did Europe get to the power crisis that “Just” appeared?
Well, is it the lack of capital being put back into oil and gas, or shutting down all nuclear power programs? Or is it both? And what do they both have in common?
Well glad you asked. They both have in common one thread – Greed. As I have discussed, it is not the path to a low carbon footprint but rather how we get there. Just turning off fossil fuels is not an easy or economically feasible possibility. The most amount of capital and economic stimulus dollars around the world have been focused on renewable energy without plans to get across the finish line.
“Gas supply is short, coal supply is short and renewables aren’t going great, so we are now in this crazy situation,” said Dale Hazelton, head of thermal coal at Wood Mackenzie Ltd. “Coal companies just don’t have supply available, they can’t get the equipment, the manufacturers are backed up and they don’t really want to invest.”
High energy prices are just the tip of the proverbial iceberg. The world inflation fear has turned into the commodity supercycle that savvy investors make lots of money, and unfortunately, a lot of lower-income folks get hurt on the way.
The energy crisis in Europe is not just isolated there, it is around the world. This is is the pre-cursor to a commodities supercycle investment spree.
“With natural gas prices already hitting record highs in Europe ahead of rising winter demand, prices could move even higher in the coming months,” said Stacey Morris, director of research at index provider Alerian in Dallas. “There is a potential it can get worse.”
Bloomberg’s resources are also showing that the food supply could be dramatically hit by the power crisis. Fertilizer production has also been impacted and the dominos keep tumbling.
The Bottom line
Everything starts with energy, but it has to be ignited by capital. The re-direction of capital to renewables around the world has been going on for years. Some of the oil and gas companies in the past had not helped the issues by poorly watching out for returns for their investors.
When a crisis is years in the making, it will be years in achieving the solution. The savvy investors will be able to protect their wealth with the right portfolio. Some of the solutions coming around the corner will be “Green” LNG with a reduced carbon footprint. That will be the same natural gas with a new carbon offset label for the ESG investors to save some of their investment portfolios.
Send me your thoughts and I would like to hear from you about your thoughts on the current market.