In this Article:
- Russia’s Grip on Europe
- Dashing into New Energy at Lightning Speed
- Energy Security Is Just As Important to the U.S.
- Commodities will play a massive role in the New Energy revolution
- A Simple Way to Profit
At 7.9%, today’s inflation is unlike anything we have experienced in decades.
Many factors contribute to the overall inflation rate. But energy prices are the main driver of inflation today.
Energy prices spiked 29.3% last year. This included a nearly 50% increase for gasoline. The world was reopening after the pandemic. This drove global demand and caused prices to rise.
So, even before Russia invaded Ukraine last month, Americans already felt the pinch at the gas pump.
Now, energy prices have skyrocketed even more. The conflict thousands of miles away caused the price of oil to jump to its highest levels in years… recent pullback notwithstanding.
I know, this sounds grim. And it’s no fun at the gas pump at all.
But there’s another side effect of rising energy costs… And it’s creating an opportunity in one of my key investment themes.
To remind you, my key investment themes are New Energy, Infrastructure, Transformative Technology, Meta-Reality, and New Money.
It’s in the first one, New Energy, that I see the opportunity I’m writing to you about today…
Events unfolding on the opposite side of the world are acting as a catalyst in the New Energy sector.
Today, I’ll take you through the specifics… and show you how you can position yourself now for future gains…
Russia’s Grip on Europe
Russia’s dominance over global energy markets has expanded significantly under Vladimir Putin.
The European Union imports nearly half its natural gas from Russia. This gas fuels Europe’s economy and heats its homes.
And that dependency has grown in recent years. In 2021, 45% of total E.U. gas imports came from Russia. That was up from 26% in 2010.
The three largest economies in the E.U. import huge amounts of their gas supplies from Russia:
- Germany: 55%
- Italy: 45%
- France: 17%
Russia also accounts for 10% of the world’s oil supply. It exports almost 5 million barrels of crude oil and 2.8 million barrels of refined products every day.
Most of that goes to countries in Europe.
Finland and Hungary get almost all their oil from Russia. Poland gets more than 55%. Germany and the Netherlands get upward of 40%.
Europe is dangerously addicted to Russia’s energy.
Putin knows this. Recently, he threatened to shut off Russia’s pipelines.
Now, I believe it’s unlikely he will follow through on this threat. After all, his country relies heavily on the income from its energy exports. From his perspective, with a war to finance, he can’t afford to shut off that income stream.
But European countries are (finally) realizing that they cannot rely on a supplier who explicitly threatens them.
And they’re taking action to reduce their dependence on Russian oil and gas…
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Dashing into New Energy at Lightning Speed
The European Union plans to cut its reliance on Russian gas by two-thirds this year.
And here in the U.S., President Biden announced an immediate ban on all Russian oil imports.
Here’s the bottom line… Global powers are determined to reduce their dependence on Russian energy.
So, they need to find alternative sources of energy… fast.
And that’s where the opportunity for us lies.
Earlier this month, the European Union outlined a plan to become independent from all Russian fossil fuels “well before 2030.” It plans to triple its renewable energy capacity by 2030.
Frans Timmermans, the European Commission vice-president responsible for the European Green Deal, promised to “dash into renewable energy at lightning speed.”
Germany is moving swiftly towards alternative energy sources.
Previously, it aimed to shift to 100% renewable power supply by 2050. And it is phasing out its nuclear power plants. The last three reactors are set to go offline later this year.
But just days after Russia invaded Ukraine, the E.U.’s top economy ramped up its timeline. It now aims to generate all the country’s electricity from renewable sources by 2035. That includes wind and solar.
And it has allocated an extra 200 billion euros to expedite the new agenda.
Energy Security Is Just As Important to the U.S.
What about the U.S.?
Thankfully, our nation is far less dependent on Russian oil than Europe. In 2021, about 8% of U.S. oil imports came from Russia.
Now, that’s not insignificant. But it meant the U.S. was in a much stronger position than Europe to announce a complete ban on its energy imports from Russia.
But oil is traded in a global market. So, if oil prices go up further because of what is happening in Europe, Americans will feel the pinch at the pump even more than they do today.
In other words, energy security is just as important for the U.S. as it is for Europe.
And one way to guarantee our energy supply is to develop domestic sources of renewable energy.
The Bipartisan Infrastructure Law President Biden signed in November 2021 earmarks $100 billion for clean energy projects.
The Russian invasion of Ukraine is an added impetus to the rollout of any projects that will help the U.S. secure its energy supply into the future.
This Metal Is Vital for a Secure Energy Future
A lot of that money will flow into the raw materials we need to build a cleaner and more secure energy future.
Commodities will play a massive role in the New Energy revolution we’ve been telling you about. Copper will take center stage.
The world will need a whole lot of copper to make the transition to a greener economy a reality.
The global wind power buildout is a case in point.
Right now, offshore wind is responsible for less than 0.5% of global electricity capacity. But the number of annual offshore wind installations is expected to grow 13-fold by 2030. This will generate demand for up to 7 million tonnes of copper.
Meanwhile, many other renewable energy systems use as much as 12 times more copper than traditional fossil fuel-powered systems. These include solar, hydro, thermal, and air source heat pumps.
The global electric vehicle (EV) race is another essential piece in copper’s story.
Currently, 10% of new vehicles sold in the world’s major markets are electric. Bloomberg estimates that by 2030, that figure will rise to about 50%.
Copper is used extensively in EV batteries, wiring, and charging stations. In fact, each EV uses up to 83 kilograms of copper. That’s more than three times the 23 kilograms used in an internal-combustion-engine vehicle.
And copper is a vital component of the wiring used in charging stations.
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A Simple Way to Profit
The global transition to cleaner energy and EVs will play a vital role in future copper demand growth.
And what’s happening in Ukraine right now has lit a fire under governments worldwide. They are determined to do whatever it takes to speed up these trends and reduce their reliance on Russian energy.
It’s the perfect set up for higher copper prices.
A great way to position yourself in copper is with the United States Copper Index Fund ETF (CPER). The fund closely tracks the price of copper, offering convenient exposure.
Happy investing, and I’ll be in touch again soon.
Regards,
Nomi Prins
Editor, Inside Wall Street with Nomi Prins