Energy Wars could boost this ‘boring’ sector


Well, once again the energy is back in the fore.

You will recall that last week we stopped with the gas price spike in Europe after Russia announced it was closing Nord Stream 1, Russia’s largest gas pipeline to Europe, for three days to maintenance.

The pipeline was supposed to return late last week, but…

On Friday evening Russia’s Gazprom said it should suspend supply to Nord Stream 1′indefinitely‘ for repairs after finding an oil leak.

And on Monday, Russia said the sanctions prevented it from repairing the pipeline and that it would not restart its gas supply to Europe until the sanctions were lifted.

Gasoline prices went up 30% that day alone…the euro fell…European stocks fell…memes started arriving on my WhatsApp…

Of course, it’s probably no coincidence that all this fuss is happening as the Group of Seven (G7) countries have agreed to put a cap on the price of Russian oil. Basically, the cap aims to reduce Russian oil revenue from buyers while keeping Russian oil flowing to markets.

So now it’s a question of who blinks first…

Something interesting is happening in the LNG market…

All of this is ahead of the European winter, which has sent shivers through the markets.

However, all is not so bad in Europe.

European countries rushed to fill their natural gas storage sites before the cold hit. Europe uses these gas storages to help with energy shocks, but they also provide around 25-30% of the fuel Europe uses in the winter.

The EU had set itself the target of filling 80% of its natural gas storage tanks by November 1. Now the good news is that Europe has reached this target two months ahead of schedule. Currently, gas storages are at almost 82%.

The new objective is therefore to reach 95% by 1 November.

But of course, with Nord Stream 1 flows now halted, the big concern is not just how Europe will get there, but also how it can replace natural gas from Russia.

Europe has tried to replace Russian energy with other energy sources such as renewable energy, nuclear energy and increasing imports of liquefied natural gas (LNG).

Today, the EU is building several LNG import facilities… which is not good news for Russia.

But of course, all of this takes time.

According to Bloomberg research, the EU needs around 118 million tonnes of LNG to replace Russian gas. But their current LNG infrastructure can only handle about half of that.

Not only that, but Europe also faces competition from Asian buyers. In fact, China has been a big buyer of Russian gas, with its Russian LNG imports increasing by almost 30% this year alone.

And then, of course, there is the question of where all this imported LNG really comes from…

Here is the price of oil:

China is quietly reselling Russian LNG to the one place that desperately needs it more than anything. Europe… and of course it charges a kidney in profit margins in the process.

As the FT reported recently, “Europe’s fears of gas shortages heading into winter may have been sidestepped, thanks to an unexpected white knight: China.” The Nikkei-owned publication further notes that “the world’s largest buyer of liquefied natural gas is reselling some of its excess LNG cargoes due to weak energy demand at home. This provided the spot market with ample supply which Europe exploited, despite the higher prices.

What is the FT ignores is that this is not a “surplus” – after all, if it were, Chinese imports of Russian LNG would collapse. No — the correct word to describe the LNG that China sells to Europe is Russian.

Not to mention that LNG still makes Europe dependent on gas imports which have to travel long distances.

The best solution is to develop renewable energies. But we could do much more.

A little-known industry that could contribute to energy security

A big concern for Europe – and the rest of the world – is that energy prices will drive up inflation. High energy prices have an impact on the cost of living and household and business spending.

And speaking of the cost of living…

At times like these, when the cost of living and inflation are high, putting your money in the right places is crucial.

That’s why my colleague Murray Dawes is offering a free presentation tomorrow: ‘30% savings‘.

You may already know Murray for his “Closing Bell” videos in silver weekend. In his presentation, Murray will show you a strategy for building your nest egg while managing risk.

You can find all the details and take your place in click here.

But one thing we may hear more about as the cost of living starts to bite is energy efficiency.

I know, I know, it feels like a nap. You’re probably thinking of insulating doors and windows, carpooling and turning down the heat.

But trust me, there are a lot of exciting things happening in the energy efficiency space, especially as technology starts to play a bigger role in this space.

Things like data collection and analysis, energy consumption optimization, smart devices, automation and the use of new materials, to name a few…

There are a lot of innovations in energy efficiency.

Until next week,

Selva Freigedo,
For silver morning

Selva is also the editor of New energy investor, a newsletter that looks for opportunities in the energy transition. To find out how to subscribe, Click here.

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