natural gas

Energy Crisis: The Best Way to Profit from Rising Costs

September 28, 2022 By admin Leave a Comment

(Russian) Winter Is Coming

During the summer, the European Union (EU) announced plans to ban seaborne imports of Russian crude oil from December 5. And it said it will impose a ban on petroleum product imports starting on February 5 next year.

If and when these bans are implemented, they will have a knock-on effect on all energy prices across the globe.

But there’s more…

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Recently, the leaders of the EU and other G7 nations decided to try to limit Russia’s oil revenues. They proposed a price cap of between $40 and $60 a barrel on Russian oil. This would also come into effect on December 5.

The Group of 7 – or G7 – comprises Canada, France, Italy, Germany, Japan, the United Kingdom, and the United States.

To say that Russia doesn’t like these proposals would be putting it mildly.

Russian President Vladimir Putin said he will make Europe freeze and turn off the gas valves to any country that imposes price caps.

It remains to be seen whether he makes good on his promise if a price cap is imposed. After all, Russia is no stranger to empty threats.

For example, about six months ago, it demanded that all payments for natural gas be made in its local currency, the ruble, or it would cut supplies. This was to prop up its then-falling currency.

The EU countries refused. This caused a spike in natural gas prices.

In the end, however, Russia backed down… silently. Why? Because it couldn’t afford to cut off the flow of those juicy gas dollars.

It’s very hard to predict how this will play out. If Russia’s war in Ukraine has shown us anything, it is that Putin can be unpredictable.

And the EU and G7 must tread a fine line between forcing Russia to abandon its “special operation” in Ukraine and keeping the lights on in Europe and around the world.

Heads of government from almost every country in the world have gathered in New York this week for the 77th United Nations General Assembly. The energy crisis and the situation in Ukraine are top of the agenda.

Unsurprisingly, Vladimir Putin is not in attendance, although he has sent his foreign minister to the event.

Energy Prices Will Continue to Rise This Winter

The way things currently stand, the rise in natural gas prices is unlikely to be fully resolved in the short term.

And it’s destined to build into a crisis here this winter.

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According to the U.S. Energy Information Administration, we generate 38% of our electricity from natural gas.

When the weather gets colder, demand for natural gas-fueled electricity will rise. And in general, colder weather increases demand for natural gas for heating. This is true in both the residential and commercial sectors. That puts upward pressure on prices.

And if the weather becomes unexpectedly cold or harsh, price spikes can intensify.

This means less natural gas would be available for storage. And this, in turn, would lead to higher prices as countries scramble to replenish their depleted natural gas reserves. It’s a vicious circle.

And I’m sure we all remember what happened in February 2021, when extreme weather conditions in Texas closed down U.S. oil refineries and plunged millions of Americans into darkness. Energy prices across the country soared as a result.

What This Means for You and Your Money

The good news is that the EU has already managed to fill 85% of its natural gas storage from alternative sources. As a result, natural gas prices there have pulled back somewhat from their recent peak.

But they still remain more than double where they were in January 2022, before Russia invaded Ukraine.

And the ongoing uncertainty means energy prices will likely stay elevated into 2023.

A good way to position yourself in the short term is with an energy-related exchange-traded fund (ETF).

The United States 12 Month Natural Gas Fund (UNL) tracks natural gas price movements.

Regards,

Nomi Prins
Editor, Inside Wall Street with Nomi Prins

P.S. As I said in my essay today and yesterday, the energy crisis on the other side of the Atlantic won’t stay on the other side of the Atlantic…

As the contagion spreads from Europe to America and from the energy markets to the financial system – a portion of your retirement could be at great risk.

[Nomi Prins: 10x Gains on a Small Firm Disrupting a Critical American Industry]

The Main Reason Behind the Energy Crisis in Europe…

September 27, 2022 By admin Leave a Comment

Why Europe Loves Natural Gas

One of the main factors driving the energy crisis in Europe is the rise in natural gas prices.

Europe loves natural gas. It gets about a quarter of its energy from it.

And what’s not to love?

It’s a superior form of fuel to oil and coal because of its energy density.

Natural gas is versatile. You can use it to heat your home or to spin a turbine and produce electricity. You can use it to power home cooking appliances and vehicles.

You can also use it to make fertilizer. And that’s crucial for the food production industry, as I wrote a few months ago.

Natural gas also produces less pollution than some other fuels. It emits about half as much carbon dioxide as coal, for example.

The upshot is that European nations wanted to move away from the dirtier, polluting fossil fuels, such as coal and oil, and, in some cases (think Germany), nuclear. So it had every incentive to fall in love with natural gas.

But there was a problem…

You see, there are two ways to move natural gas around. The first is by sea, using liquified natural gas (LNG) carriers.

This option requires an export facility to chill the natural gas down until it becomes liquid. It is then pumped onto these giant boats and shipped across the world.

Then on the other end, you need an import terminal to re-gasify it. All this infrastructure takes billions to make and years to construct.

The second option is much simpler. It involves transporting natural gas via pipeline.

Europe chose the easier way. It imported natural gas from Russia through pipelines.

Russia was right next door, after all. And it produced lots of natural gas.

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From Nord Stream to No Stream

Until recently, Russia was a major exporter of natural gas to the rest of Europe. Last year, the European Union (EU) got roughly 45% of its imported natural gas from Russia, according to the International Energy Agency.

Russian gas reaches Europe via a complex network of pipelines running through eastern Europe.

The most important pipeline is Nord Stream 1. It’s approximately 1,200 kilometers long and runs under the Baltic Sea between Russia and Germany. Up to 170 million cubic meters of gas can flow through Nord Stream 1 daily.

Since it became operational in 2011, more than 441 billion cubic meters of Russian gas have flowed to Europe via Nord Stream 1.

In 2021, Europe imported 155 billion cubic meters of natural gas from Russia. Nearly 40% – 59 billion cubic meters – came through Nord Stream 1.

Nord Stream 1 is owned and operated by Nord Stream AG, whose majority shareholder is the Russian state company Gazprom.

For years, Nord Stream 1 has embodied the tacit deal between Russia and the European Union.

Russia was willing to supply copious amounts of natural gas at favorable prices. It developed infrastructure to take its gas to Europe.

Europe built industries that depend on that cheap supply of Russian gas. And industrial powerhouses, like Germany, built their entire economies around it.

But then, earlier this year, Russia went to war with Ukraine. That changed everything.

The EU slapped Russia with unprecedented sanctions. Russia retaliated by cutting the flow of natural gas via Nord Stream 1 by about 60%.

Then during its annual scheduled maintenance this summer, the pipeline flow dropped to zero. When it came back online, it came back at 40% capacity before dropping to 20%.

Then, at the end of August, Russia shut down the pipeline again, supposedly for maintenance. This shutdown was to last three days. But at writing, the pipeline remains offline.

Russia’s Endgame Could Mean Lights Out for Europe

As a result of all these actions, the European gas price went parabolic this summer. At one point, it cost $340 per megawatt-hour (MWh). That’s 312% higher than in January 2022, before Russia invaded Ukraine.

You can see the huge spike in natural gas prices that coincided with the Nord Stream 1 shutdown in the chart below.

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Now, while the price has dropped back somewhat in recent weeks, as Europe secures alternative supplies, the uncertainty surrounding their natural gas supply is a huge concern for the eurozone countries.

Consider this…

At about $12 per megawatt-hour (MWh) in November 2021, the eurozone’s energy import costs were $200 billion. That’s 1.6% of its GDP.

If gas settles at about $200 per MWh, this number will increase by roughly $700 billion to 7% of GDP.

At $300 per MWh, it would rise by about $900 billion. That’s a crippling 8.5% of its GDP.

So, Russia’s endgame is simple – to keep gas prices as high as possible to inflict maximum pain on Europe, so it eases off on sanctions.

Energy Rations Becoming a Reality

The way things are going, it looks inevitable that Europe will have to ration gas and energy come winter.

Germany is already discussing its options. German politicians are trying to decide how German industry will be prioritized. Difficult questions are being asked.

Questions like… Who gets the gas when there is a shortage? Who has to close the shop?

But whichever way they slice it, it will likely end up plunging Europe’s largest economy into crisis.

And if that happens, the entire European Union – and potentially the entire world – is in trouble.

Tomorrow, in the second part of this two-part essay, I’ll show you how to turn rising energy prices into profits in your portfolio.

Regards,

Nomi Prins
Editor, Inside Wall Street with Nomi Prins

[Nomi Prins: 10x Gains on a Small Firm Disrupting a Critical American Industry]

The Miracle Material on Track to Replace Lithium Batteries…

April 29, 2022 By admin Leave a Comment

Elon Musk's Next Acquisition?

Now, before you ask the question, let me answer it for you: Yes, Elon Musk knows this, and the rumor mill is already turning out guesses as to when Tesla might make the switch-over.

So far, however, there has been one major hurdle: cost.

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Up until now, the cost of production for what could go down as the miracle material of the 21st century has been as high as $15,000 per kilogram.

That's at least 1,000 times too high for graphene to be viable in the mass-production game, but all of that is about to about to change.

An Australian company based in Brisbane has patented a process for manufacturing graphene that may be as game-changing as the material itself.

Using nothing more than natural gas the chief raw material, overhead could be slashed to just a couple dollars per kilogram.

Moreover, with natural gas being widely abundant in North America, the graphene will pose no issues whatsoever in terms of troublesome links in the supply chain.

Every Lithium Battery You Buy Feeds Our Rivals

Right now, it is completely conceivable that graphene will supplant lithium-ion batteries as the global standard for rechargeable batteries before the end of the decade.

However, for this to happen, the company that owns the patents to this new production method will have to sign a lot of contracts with a lot of battery-makers to license this technology.

Among them, the biggest battery-maker in the world, Tesla Motors (NASDAQ: TSLA).

The company behind all this is well on the way to achieving the goals set out by its founders in 2016.

It's already operating a production plant in Brisbane; already producing functioning cells; and already sending out early-run samples to potential clients for testing and evaluation.

The first graphene batteries will be the tiny coin-style units that power many small devices, including the long-term memory storage in your laptop or tablet.

Ultimately, however, this small unknown tech firm hopes to put its technology into every product class in existence, from wireless devices, to cars, to residential and commercial distributed energy storage systems.

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Is This Company Tomorrow's Standard Oil?

If this company is successful in penetrating even 5% of today's lithium market, that will represent annual revenues totaling more than 10 times the company's current market capitalization.

Yes, the company is that small — under $300 million (USD) at the moment.

But let's be realistic. If these batteries deliver on their promise, this company won't be taking 5% or even 25% of the market…

It will wipe out the lithium-ion battery market entirely and make current prospective alternatives, like manganese, obsolete overnight.

It will, put more succinctly, become the energy supplier of the 21st century, the same way the oil giants of the gilded age were more than 100 years ago.

Given his penchant for buying, it's fairly safe to assume that Musk will snap up this company and all of its IP outright long before that happens.

Which makes right now the time for risk-tolerant investors to make their mark.

Shares of this graphene battery-maker are already trading on North American exchanges. In fact, you can buy their shares today, right now, if you have access to a live broker or any popular online trading platform.

All you need is the ticker symbol.

But before you make that decision, I urge you to get all the facts and understand all the risks involved.

Do your due diligence, but do it quickly. Yesterday alone, shares rose more than 7%.

There's no telling where they'll be at the end of the week.

Don't delay. Get informed now.

Fortune favors the bold,

Alex Koyfman

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Is The World’s Most Controversial Pipeline About To Pivot To Hydrogen?

April 7, 2021 By admin Leave a Comment

Keeping the position of key energy supplier to the Old Continent comes at a price. And it looks like it’s a price Russia is ready to pay it. Moscow is silently investing in the production of hydrogen, potentially aiming to make it flow through its new Nord Stream 2 pipeline. While the future of the controversial project still fuels debates and uncertainties, Russia decided to adapt to its neighbor's needs for cleaner energy sources, and in particular for hydrogen, which the European Commission put at the forefront of its recovery agenda.

A dialog between Berlin and Moscow is currently underway to produce green hydrogen on a large scale. That information was revealed during a conference held at the German-Russian Chamber of Commerce on February 16th. But as surprising as it may appear, this narrative is not new. Firstly mentioned in 2018, the hydrogen option for Nord Stream 2 was then put on the table by Uniper who, in March 2020, envisioned the ability of the pipeline to transport up to 80% hydrogen.

“One of the key arguments against Nord Stream 2 is that adding natural gas contradicts the decarbonization objectives of Europe. Here, Russia's counter-argument is that Nord Stream 2 also has a hydrogen potential, and can fulfill those decarbonization objectives”, according to Luca Franza, a researcher on EU-Russia gas relations.

The choice of hydrogen investment by Russia can be interpreted as a tactic to make the project more appealing and to change Western countries’ stance on Nord Stream 2 sanctions. But beyond the geopolitical aspect, it raises several questions on its actual feasibility.

Firstly, will this hydrogen be blue (produced from fossil fuel sources) or green (carbon neutral)? The question is difficult to answer since the EU is not adopting a “color-blind” approach to hydrogen anymore. According to Luca Franza, “Russia has a better comparative advantage along the blue hydrogen value chain: it is, therefore, better positioned to send blue hydrogen rather than green, for which costs are still very high”.

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Stephan Weil, prime minister of Lower Saxony State, remains hopeful about Russia’s renewable energy potential for green hydrogen. “Russia can offer giant land potential as a basis to build up solar and wind power, and huge water resources for hydropower,” he commented, quoted by Reuters. However, looking at Russia's current energy mix, the country still relies for more than 60% on coal and natural gas and is far from being a role-model in renewable energy production.

Moving to a 100% green hydrogen economy implies using blue hydrogen as a transition fuel until at least 2045 when costs are expected to begin to converge. The cooperation framework set between Russia and Germany seems to ignore these considerations and is determined to pursue green hydrogen production.

The second major question then: how will this hydrogen be transported?

The first option, and the least realistic one, would be the transportation of just hydrogen through the pipeline. Another solution consists of blending hydrogen with natural gas, but this method has several drawbacks. Regulations on allowed proportions of blending vary per EU member state and can range from 1% in the Netherlands to 8% in Germany under certain conditions. Recently, several MEPs have called for the harmonization of these blending standards, but the goal is far from being achieved.

Finally, the compatibility between the pipeline materials and the transport of hydrogen is also not that obvious. Research is being carried out on the need to add polypropylene to the pipeline to avoid corrosion. Addressing the leakage issue of hydrogen also becomes a necessity.

Although technical modalities of the Nord Stream repurposing seem blurry, Russia is not starting entirely ex nihilo in the hydrogen field. In the long run, its ambitions are much larger than the Nord Stream 2 pipeline. Guided by the 2024 Hydrogen Roadmap, Russian companies started ramping up investment in clean hydrogen.

Russian energy giant Gazprom started developing the pyrolysis technology, which converts natural gas into hydrogen after heating it up. This technology is less energy-intensive than the electrolysis process, and less polluting than methane reforming, this method has the potential to kill two birds with one stone. The only issue is that it has not been commercially produced on a large scale yet.

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Russia's hydrogen production would be divided into two clusters: the North-Western one will transport hydrogen towards Europe, whereas the Eastern one will have Pacific-Asia as a final export destination. In parallel, Rosatom has been tasked with the mission of testing a hydrogen-fueled train in the industrial Sakhalin region. The nuclear company is also looking at the production of hydrogen from nuclear power – an option that is gaining popularity nowadays. It has already received funds from the Russian government for this research.

However, nothing is less certain than the fact that Russia will be Europe’s most competitive supplier. Moscow does not yet possess sufficient hydrogen production capacity to become price-competitive. Thus, it will not be likely to meet European demand, estimated to reach 700TWh in the “business-as-usual” scenario (or 8% of total energy demand) by 2050 according to the EU Hydrogen Roadmap.

Projections are even more difficult to make in a market that does not yet exist and will be created only based on political will. “We tend to live in the future concerning hydrogen: Europe has ambitious projections concerning hydrogen demand, but we act like we are already there”, says Luca Franza.

It is also unclear why Europe would prefer importing hydrogen from Russia instead of installing Carbon Capture and Storage (CCS) capacity for blue hydrogen produced domestically.

In the end, although this green rebranding of Nord Stream 2 adds another element to the equation between energy security and environmental impact, it will not change the opinion of its traditional opponents, and even less to impact the sanctions imposed on it.

Tatiana Serova

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Here’s Why the Recent Winter Storm Devastated Texas

March 27, 2021 By admin Leave a Comment

The power problems in Texas didn’t start with the recent winter storm. They started long before the Lone Star State had any electricity at all.

A little more than 160 years ago, a special convention in Texas voted to secede from the United States.

It was the beginning of a mindset that’s still part of Texas today. In essence, Texas doesn’t want the federal government meddling in its affairs.

We’ve all heard the saying “Don’t mess with Texas.” And there’s a lot of truth behind that…

Texas has a lot to be proud of, for sure. Most of our fossil fuel comes from the state.

And it’s shaping up to be America’s new technology powerhouse. But that won’t happen without a reliable electric grid.

Last week, Texas came to a grinding halt. It had no power and little water. Water plants need electricity to run the pumps and purify the water.

So why did Texas’ electric power grid fail last week? Let me explain…

More Like the “Alone Star” State…

The U.S. electrical transmission grid is actually three separate grids. There’s the Western Interconnection, the Eastern Interconnection, and the Electric Reliability Council of Texas Interconnection (ERCOT).

United States Electric Transmission Grid

The Western Interconnection and Eastern Interconnection regions have six major grid interconnections. And there are many connections between states in each region.

When those regions have major weather events that take generators offline, grid operators can call on neighboring states or regions to supply additional power and keep the grid operating.

However, there are only two ties between the Eastern Interconnection and ERCOT. And ERCOT has no connections to the Western Interconnection.

Last week, when generators in Texas started tripping offline as a result of the ice and cold temperatures, grid operators couldn’t meet the demand. And because ERCOT has very few ties with the other energy grids, it couldn’t get power from anywhere else. The storm knocked about 30 gigawatts of generating capacity offline.

So, basically, Texas was all alone… as it elected to be more than 160 years ago.

Additionally, ERCOT is an unregulated power market. That means prices can move higher when demand exceeds supply. And they moved 10,000% higher!

ERCOT’s wholesale electric prices in Houston during normal times run about $22 per megawatt-hour (MWh). But during the storm, those prices were more than $9,000 per MWh.

Now customers with variable-rate electric plans are seeing some astronomical bills.

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When Gas Turns to Ice

You may be wondering why Texas’ grid was so susceptible to winter weather in the first place. Some politicians were quick to blame frozen wind turbines. But wind turbines provide only 10% of power in Texas during the winter.

The rest comes from thermal plants. Most of those run on natural gas.

Texas is normally awash in natural gas. Its Permian Basin is one of the largest gas fields on the planet.

But gas stopped flowing to Texas power plants when wellheads and delivery lines froze from condensation that is normally present in natural gas.

And suppliers typically don’t spend the money to winterize distribution systems. They can get away with it 99% of the time due to the region’s warm climate.

Texas’ electric utilities also stopped working with no gas supply. Natural gas-fired generating turbines went off the grid.

I’ll wager that after all the dust settles, Texas utilities will implement more renewable energy sources combined with energy storage capacity.

And that will be a boon for the renewable energy companies that service the region.

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Still, some Texans are taking matters into their own hands. My friends who live in Austin called their electrician and got on a waiting list for a whole-house backup generator.

Power Problems: They’re Bigger in Texas

Electricity is easy to take for granted until you don’t have it. Then you can’t get it back fast enough.

So the proud state of Texas might have to eat a slice or two of humble pie. It needs to winterize its power grid and gas distribution.

Adding a few more connections to the Eastern and Western Interconnections is a good idea too. That will greatly improve Texas’ access to other power sources when it’s critically needed.

Today, there are plenty of companies disrupting the power sector (in a good way). I’ll be sure to keep you updated on the latest news within this industry.

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Good investing,
Dave

natural gas

Energy Crisis: The Best Way to Profit from Rising Costs

In this Article

(Russian) Winter Is Coming

Energy Prices Will Continue to Rise This Winter

What This Means for You and Your Money

The Main Reason Behind the Energy Crisis in Europe…

In this Article

Why Europe Loves Natural Gas

From Nord Stream to No Stream

Russia’s Endgame Could Mean Lights Out for Europe

Energy Rations Becoming a Reality

The Miracle Material on Track to Replace Lithium Batteries…

In this Article

Elon Musk's Next Acquisition?

Every Lithium Battery You Buy Feeds Our Rivals

Is This Company Tomorrow's Standard Oil?

Is The World’s Most Controversial Pipeline About To Pivot To Hydrogen?

Here’s Why the Recent Winter Storm Devastated Texas

More Like the “Alone Star” State…

When Gas Turns to Ice

Power Problems: They’re Bigger in Texas