January 14, 2022

My King Operating Research team has been watching the geopolitical situations in the EU and how they will impact WTI, Brent, and Nat Gas. In our weekly roundtables, we have been keeping our stakeholders and investors apprised of world markets and the energy crisis. 

We did not get to this horrible energy crisis overnight, and it won’t be fixed for years. As the fall of the Soviet Union was between 1988 and 1991, the rise of renewable energy was just taking hold in the 1970s. Funding and government involvement really was taking hold around 2001. The chart below from the EIA gives a great timeline on the energy path to renewable energy. 

energy - renewable -eia - transition -ENB
Source: EIA

This quick walkthrough of history is important to understand the geopolitical issues today and about to unfold. The unlimited printing of money and forcing countries to move to renewables only created the swamp we now call the “Energy Crisis”. Going “Greener” has only created worldwide inflation and consumers get to pay the price. Clean energy has to be provided to the consumers with the lowest kWh while impacting the environment the least. Wars have been and will be fought over energy.

Russia has to regain the buffer zone that the former Soviet Union provided.  The first step was building the pipelines of natural gas through Ukraine years ago, and then Germany forced their renewable energy policies on their citizens. The Nord Stream 2 pipeline that Putin needs to be approved by the EU will be the last handcuff put in place for total natural gas market control. As energy exports are over an estimated 35% of the Russian GDP, they are now budgeted for over 37% for 2022. This would require higher oil and gas prices as there are questions about Russia’s ability to even meet the demand. 

If Russia were to control both Belarus and Ukraine the advantage is Putin’s. He is also using the fall of NATO as a weak moment in time to justify the grab of Ukraine’s energy imports. The Russia / NATO talks have had no breakthroughs. Nor will they as they are just an excuse to use a treaty to justify his military actions. 

Posted today; “(Reuters) – Ukraine was hit by a cyberattack splashing a warning across government websites to “be afraid and expect the worst”, while Russia, which has massed 100,000 troops on its neighbor’s frontier, released pictures of more of its forces on the move.

The cyberattack unfolded hours after talks wrapped up with no breakthrough between Russia and Western allies, which fear Moscow could launch a new military assault on a country it invaded in 2014.”

The EU needs to Be very afraid as Ukraine hit by cyberattack as Russia moves more troops
A laptop screen displays a warning message in Ukrainian, Russian and Polish, that appeared on the official website of the Ukrainian Foreign Ministry after a massive cyberattack, in this illustration taken January 14, 2022. REUTERS/Valentyn Ogirenko/Illustration

Also posted today, the Russian natural gas storage is at its lowest levels in years for this time in the winter season. Just another issue for higher energy prices that are on the horizon. 

The Bottom Line

There is a great awakening happening around the world. This awakening is the realization that bad energy policies and high energy costs come at a cost that will impact peoples freedom’s, financial stability, and even their countries. 

The “Greener” movement has now accepted natural gas as a renewable as there is no way to get to Net Zero without it and nuclear. This narrative started with U.S. legislation, then COP26 and now the EU has adopted the same talking points. All of this does not help the fact that the gears are turning towards geopolitical unrest, potential wars, and worldwide financial problems. 

There is hope that the tide can be changed in two to three years rather than ten to twenty. A well-planned “Greener” will be the only way, and oil and gas will always be needed at some level. We have yet to reach worldwide peak demand and production will not be able to catch demand before two years. So we are standing at the $120 to $150 oil this year, and higher if armed conflicts break out. 

As always check with your CPA if alternative investments are good for your portfolio and Take the assessment and see if it is right for you

Please reach out to our team at any time. 

Jay R. Young, CEO, King Operating

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