The Global Oil Impact. An inflationary conundrum would be the delicate way to describe the current situation on oil. First, it makes all the sense in the world to cut Russian oil exports off. The Country is a gas station at this moment with no ability to generate income outside of energy. That was the increase in pricing that you saw on Sunday afternoon with the rest of us as oil popped to $140/barrel and has settled back down to the $120s. Whether you’re buying wheat and barley (stock up on your beer) or steel and lithium, costs are rising for inflationary and macro reasons.
Next Move, Politically Speaking. US politicians are likely to give Biden no choice on a Russian oil import ban, both for political reasons (he will be blamed for higher gas prices/domestic production will have to increase/force a deal on domestic energy independence) as well as diplomatic reasons (Russia is unlikely to sustain a global import ban for long). You are hearing the White House speak up and blame the oil sector for not producing on the leases they currently hold while Manchin is saying let’s make a deal that increases production and delivers the clean energy package that is wanted. Meanwhile, Europe is contemplating its decisions years ago to give this leverage to Putin including the addition of the gas pipeline Nord Stream 2, which could trigger an energy realignment of the fuel sources that are needed to be more self dependent or dependent on friends like the US LNG exports.
What To Look For. Inflation will increase the cost of electricity and is likely to adjust the proformas for asset owners but with a commensurate increase in installation costs for materials and labor. The Ukrainian farms and surrounding areas account for a third of the global wheat and barley supply which is now significantly disrupted and prices in the live markets are adjusting to this. With the input cost of oil, any transportation costs will increase. Unless you drive electric, you’ve already felt the impact at the pump of filling up your car. So will your suppliers, vendors and employees. The optimistic view is that this should trigger an energy deal in DC including tax credits driving this market forward with enhanced urgency.
- Politico: Zelenskyy adviser – Global ban on Russian oil would end Putin’s attacks
- Scientific American: Amid War, Biden Reluctant to Unleash Clean Energy Rhetoric
- Energy Storage News: CAISO – 1GW dispatch during July wildfire a ‘fabulous moment’ for battery storage amidst 12-fold growth
- Axios: Europeans throw cold water on possibility of Russian energy ban
- Utility Dive: California clean energy advocates urge regulators to ‘go big’ with offshore wind goals
- Bloomberg: SoftBank Energy Unit Gets Up to $600 Million, Led By Ares Funds
- Canary Media: Goldman Sachs and Shell bet $75M that chain stores can boost grid resiliency
- PV Magazine: IREC releases training courses for residential solar plan
Opinion
Best, Yann