The Latest Twist In The Crazy Energy Sector

Key takeaways

• The controversial Nord Stream gas pipeline from Russia to Germany has been sabotaged according to the EU, with both sections being hit by explosions
• Russia has been implicated in the attack, though the Kremlin are denying it and the reasons behind such a move remain unclear
• It’s the latest in the madness that’s been felt in the energy sector since the outbreak of Covid
• The volatility is creating a perfect backdrop for an increase in clean energy, and we’ve created a way for investors to use AI to take advantage of the opportunity

What on earth is going on, in the energy sector? Yes that’s right, we can bring a TikTok reference into an article about global commodity markets. It’s how we do.

But seriously, it feels like the past two years have been a constant stream of unprecedented events. When it comes to energy prices and the global supply chain, the hits just keep coming.

In the most recent developments, the controversial Nord Stream gas pipeline from Russia to Germany has been blown up.

Over the past couple of years we’ve seen the price of energy, especially oil and natural gas, soar to all time highs. We’ve experienced huge supply chain disruptions and the war in Ukraine, which has led to a US and EU embargo on Russian oil which is still being purchased on the down low by China and the Middle East.

It’s like an episode of Jerry Springer. The only problem is that it impacts all of us.

If you’re confused by all this, don’t worry. We’re going to run you through what’s been happening, the problems up ahead and how investors can navigate these uncharted waters.

Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $100 to your account. 

Who blew up the Nord Stream Pipeline?

On Monday afternoon engineers at the Norstream 2 gas pipeline discovered a loss of pressure in the pipeline. In layman’s terms, this means there was a big hole in it somewhere.

With crews dispatched to review the problem, on Tuesday it was discovered that the other half of the controversial pipeline, Nord Stream 1, had also sustained “unprecedented” damage.

Over the past couple of days it has become clear that the problems are no coincidence. On Wednesday the EU announced that the damage has come as a result of “sabotage” and while no mention was made of Russia, their involvement has been heavily implied.

As of right now the explosion isn’t expected to cause any further problems with the already stretched European energy market, as the pipeline hasn’t carried any gas since Russia’s invasion of Ukraine in February.

So while Russia is the number one culprit, analysts aren’t quite sure the game plan behind the move. After all, gas isn’t flowing actively through the pipeline as the EU has shut off their market from Russian gas as a result of the war.

So far the Kremlin has denied any involvement in the sabotage, with spokesman Dmitry Peskov calling the accusations “predictable, stupid and absurd.”

It’s just the latest in the controversy around the Nord Stream pipeline. It’s been a topic of hot debate even before it opened in 2012, given the increasing level of Russian energy reliance it has imparted on European nations. Especially Germany.

The operator of the pipeline, Gazprom, is a Russian state-controlled energy provider and is one of the largest companies in the country.

What kicked off the energy crisis?

This is just one part of the global energy crisis which has come off the back of the pandemic. With global lockdowns causing supply chains to grind to a halt, the energy markets have struggled to adjust quickly to the rapid changes in demand.

This has caused wildly fluctuating prices in all energy commodities, including gas but also crude oil (which is refined into most fuels such as gasoline, diesel and even jet fuel).

Against this backdrop, the situation has been made worse with Russia’s invasion of Ukraine. In a move aimed to deter Vladimir Putin by cutting off a major source of income, many nations, including the United States and the European Union, have placed an embargo on Russian oil.

Given that Russia produces up to 40% of the EU’s natural gas, this is a major dent in the level of available supply.

The US hasn’t been as impacted quite as badly as Europe, but the energy market is a global one and so we haven’t been totally immune. This is particularly true for oil, with Russia being the third largest producer of crude in the world.

Just look at how much gas prices rose into the summer. They have started to come back down to earth now, but it’s not been an easy ride.

Saudi Arabia and China have been buying Russian oil and gas

Topping all these issues off has been the fact that Russia has still been able to find a buyer for their oil and gas. According to Reuters, China increased their imports of oil from Russia by 28% in the 12 months to August with Saudi Arabia increasing their imports a further 5%.

This makes Russia the largest supplier of oil for China, and overall it puts Russia’s total oil exports 7.3% higher than they were last year. So with a major oil embargo, Russia is exporting more oil. Makes sense.

It means that Russia has been able to continue to generate significant cash flow to help fund their war effort. The price may not be as high as it would usually be in an open market, but nevertheless the embargo hasn’t been as successful as Biden and other heads of state will have hoped.

The green energy revolution

With all this madness going on in the background, the push towards green energy has been growing steam.

Everyone has known for a while now that we need to begin to bring more diversity into our energy grid. These latest problems have highlighted just how interconnected the world is and how reliant we are on a stable global economy for the system to function smoothly.

President Biden’s $1.2 trillion infrastructure bill includes $73 billion allocated towards improving the clean energy credentials of the United States and many countries around the world are putting greater than ever resources towards alternative energy such as solar power, wind turbines and even nuclear plants.

In addition, the Inflation Reduction Bill has also allocated a further $369 billion to energy, security and climate change projects.

There are a number of companies who are well positioned to take advantage of this extra money flowing into the sector. This is particularly true for solar power, with the Inflation Reduction Bill also including a 30% tax credit for various different types of solar installations.

One company in particular that has been making headlines recently is SunrunRUN
.

As well as the benefits that will stem from the 30% tax credit, they’ve also announced an interesting partnership with Ford. It will give their customers the ability to install Sunrun solar panels with Ford’s home charging and backup home power system.

For drivers who are keen to be more green, this is a way to really lean into the renewable space.

How can investors benefit from the constantly changing energy sector?

Investing in anything is tricky right now, but investing in the energy sector takes that up a notch. Traditional energy producers (the oil companies) have been the biggest winners in 2022 despite a volatile market overall, but that could change at any time.

Clean energy is a huge growth market, but given it’s still in its infancy it’s hard to know which companies are going to end up the big winners over the next decade.

To help investors ride this wave we created the Clean Tech Kit. This Investment Kit offers diversified exposure to a number of verticals within the sector including renewable energy, electric vehicles, waste reduction, hydrogen fuel cells and more.

The kit invests with a global focus and uses AI to balance between a mixture of ETFs and individual stocks. Every week our AI considers multiple data sets to predict which portfolio allocation is likely to provide the best risk-adjusted performance.

So not only can you harness the power of AI to supercharge your portfolio, you can do with a clean (see what we did there?) conscience knowing that your money is being used as a force for good.

Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $100 to your account.