Bloomberg Green article says the transition to 100% zero carbon will cost $114 trillion dollars. That is 5-6 times the size of the US single-year GDP. I don't think that will happen. Nevertheless, the political class will move this agenda forward. Heads we win, tails we win more.
Interesting comments out of JP Morgan CEO this week regarding our energy policies in the US. In addition, it looks like the zeitgeist is moving away from ESG, at least by the bankers.
As most of you know the OPEC members decided on a 2 million barrel per day reduction to their production quota. This is not necessarily a cut in production because the organization members were already underproducing their quotas by 3.5 million barrels. Nevertheless, this is a big boost for oil prices because it represents a sentiment shift in oil markets. Of course, oil markets responded by rallying. I discuss the second-order effects in this video.
With the Nordstream 1 and 2 pipeline destruction last week, the EU energy situation is now critical. However, the various industries will try and adapt as best they can. One way to adapt will be to replace gas consumption with oil consumption. This could be close to a million barrels per day.
As Stan Druckenmiller has said," “Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks, and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets...”~ Stan Druckenmiller This is what we are seeing and it will continue until central banks pause and go back into a new liquidity cycle.
Due to sanctions placed on Russia by the EU, oil and refined products now need to be sourced from places more distant from the EU than before. This is causing more ton-miles for the existing tanker fleet. This is also causing rates to skyrocket as there are not enough tankers to move all this product further distances. It appears, that for as long as sanctions are in place, we are looking at a time of elevated rates for tankers.
The energy minister was interviewed on CNBC. He was asked why is India still buying oil from Russia. The interviewer tried to make the purchase of oil from Russia a moral issue. The minister wasn't going to have it. He is responsible to India not the EU, the US, or Ukraine.
It was announced yesterday that the Nordstream 1 pipeline will be down indefinitely. The only Russian gas coming into the EU is coming in through the pipelines from Ukraine. That will not be enough. We are now seeing story after story of businesses shutting down and jobs lost.
For several years billionaire resource investor Rick Rule maintained the view that a real move higher in uranium prices would be incumbent on the restoration of nuclear energy in Japan. It seems he was proved correct as Japan recommitted to nuclear energy in the past week which caused a blastoff in uranium stock prices.
Recent comments by the Sadi Aramco CEO and the CEO of OPEC back up what we have been saying for a while now. Although the west is moving rapidly to transition away from oil, the rest of the world, and the majority, will be using oil for decades.
Lots of energy news this week. Power prices in Europe are soaring to record highs. How long can this continue until there is a political backlash? Japan vows to turn on more nuclear reactors for energy security.
Oil prices have been dropping over the past couple of months. I explore why this is and where oil prices might be going. Although oil prices are dropping natural gas and coal prices are at historical highs. Why it might be a while before they drop.
Exxon and Chevron reported record quarterly results this week as record refining margins along with high oil prices resulted in excellent results. European oil majors also reported excellent results with several companies announcing additional returns of capital to shareholders via share buybacks.
Schlumberger, the world's largest oilfield service provider, just reported a tremendous quarter, guiding their business substantially higher for the next few quarters. This report along with Halliburton's bullish report earlier this week indicates that we finally have an upswing in the oilfield services sector. A boom that I believe will outshine previous booms.
CPI came in at a decades high of 9.1%. If calculated the way it was in 1980 it is actually 17%! I also discuss how far oil could fall in the current recession.
In the past, Buffett has said he does not like cyclical or commodity-type businesses. Yet he has been buying Oxy and Chevron stock. What gives. I discuss in this week's video.
The bond market seems to be shifting from concern over inflation to economic weakness. The bond market forecasts a rate cut in the first half of 2023. The energy crisis continues as the "leadership" in the EU and the US just can't stop digging their hole deeper.
Rates are being raised by the FED. However, the market has raised rates well in advance of FED. Consequently, the FED is way behind the curve. How far can rates go up before an over-indebted economy full of malinvestment begins to break? How will this affect energy prices? Will liquidity and sentiment overwhelm the positive long-term energy fundamentals in the short term?
Consumer confidence is at an all-time low. Credit card debt is at an all-time high. Energy costs continue to strangle the US consumer and economy. I give a free stock pick that could soar during a recession.
The energy crisis continues. At some point, the energy price will rise to a sufficient price to choke off demand. The question is what is that price? $150, $200, or even $300 per barrel. In the meantime, many of the stocks in the Actionable Intelligence Alert Newsletter are printing tons of money.
Japan is facing a tremendous energy crisis due to the fact it imports almost 100% of its domestic energy. The government has been promoting conservation but that is not enough. The PM announced that it is time to turn Japan's idled nuclear fleet back on to avoid an energy crisis.
We are having inflation in fuel and food mostly because we do not have enough of these materials. Yes, the monetary malfeasance of central banks has contributed to the price increases. Nevertheless, we simply do not have enough oil and refined products to meet demand. The same is going to happen to food.
I don't know anyone that does not have a summer trip planned. Oil supply is already struggling to keep up with demand and we are looking at a big hike in jet fuel demand. Diesel, the workhorse of the economy, is already struggling to keep up with demand. But what price level finally cracks the economy?
The EU and US are on a sanctions escalator and prices continue to rise. Meanwhile, the ECB and BOJ continue to print money. The world is facing a stagflationary mess. Prepare for further food and energy price increases.
As long as oil prices stay reasonably high. However, we have many headwinds to higher oil prices; tightening liquidity, rising rates, fiscal stimulus fading, and weakening economy around the world. Nevertheless, this week's quarterly earnings reports from Halliburton and Schlumberger were very positive with the forward guidance positive also.
The knock-on effects of the Russian sanctions are exacerbating the deglobalization that was already happening. Longer supply chains and less efficiency are going to lead to higher prices including possibly higher tanker rates.
Lots of positive news in the uranium and nuclear sector. It appears that the uranium price is now entering a new upleg in prices. This is after the consolidation we have experienced in uranium share prices over the last six months or so.
Not sure the EU politicians contemplated that when they put sanctions on Russia because of its invasion of Ukraine they would experience any repercussions. Russia is now demanding payment for the gas, and I suspect other commodities in the future, in rubles. Not sure the EU saw this one coming. Panic is setting in among politicians and business leaders as no rubles equals no gas.
The EU and US have instituted the harshest sanction regime on Russia that has been seen on a country. It seems the decision was made in haste without much consideration of the knock-on effects they would cause for their own economies and the world at large.
The title may be a little click baitey but consider the facts. Plague=Covid, War=Ukraine, Famine=Result of bad decisions on sanctions We are seeing more and more countries ban exports of food as it becomes increasingly likely we are going to be looking at shortages of many staples like wheat, soybeans, and corn.
