Sharing my macro and regulations reviews on public blockchains, permissionless dapps and commodities.
Sharing my macro and regulations reviews on public blockchains, permissionless dapps and commodities.
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In April 2021 I wrote this piece on the role of rare-earth minerals in the renewable energy and energy storage industries. At that time, I had collated a portfolio of 21 stocks playing a key role in achieving more sustainable production, storage, and consumption of energy. I shared this list freely with those who reached out to me and still do. Since then, most of these assets doubled their valuation, and I must say they saved my portfolio as most of it is crypto assets!
I pointed out that the COVID crisis caused a collapse in the commodity/energy market and that was a good opportunity for investors to integrate commodities into their portfolios to prepare for the energy transition and to protect them against central banks' policies and the growing risk of "violent inflation". But I didn’t imagine the Ukraine situation would reach such proportions and that the EU would sacrifice its relationships with Russia. How would one have anticipated that the EU would cut off 40% of its gas supply - 155 billion m³ of pressurized liquified natural gas (LNG) from Russia's numerous pipelines rooting mostly from the Yamal Peninsula?
Now that inflation and the "Energy war" are ramping up, I’m sharing my thoughts on the current crisis and how to offset or even benefit from it.
Energy is a dirty business that causes environmental destruction and feeds multiple forms of tyranny. It is plagued by lobbies, gangs, wars, embargoes, sanctions, and the lack of investments in nuclear and geothermal energies. These make me think twice before investing in the energy sectors, but our positions combined won’t weigh much against these realities and I just don’t want to be a victim of this energy war.
Coal, gas, and oil represent the biggest source of the world’s electricity mix. The Ukraine war is constraining the supply of oil and LNG, and is totally reshaping Europe's energy system. First, we liquefy gas at -162°c to transport it in pipelines while Europe lacks gasification capacity and supply mediums as already maxed out. Most of Europe's spare capacity is in Spain, France, Belgium & Italy, and there are several bottlenecks for efficient distribution, including pipe flow direction, itinerary hurdles, and gasification terminals.
Gas demand in Europe is so important (22% of the global LNG import) that we will need to substitute it or reduce our demand amazingly fast to adjust to the supply shock. It is possible to see Japan (27% of global LNG import) turn back to its nuclear power plants, thus cooling the global demand for LNG, but this won't happen before mid-end 2023.
Europe uses gas mostly to generate electricity (35%), to feed heating applications (30%) and to run its industries (+20%). Substitution is Europe's only option not to experience blackouts, and it will be first and foremost driven by more imports of fossil fuels. Coal imports have already grown significantly and are expected to see a 43% increase in 2023 over 2022.
EU's industrial sector cannot keep competing with countries with much cheaper costs, and we will see more and more factories reduce output if not shut down. Although the euro has depreciated (which should boost exports), I genuinely believe that Europe’s industrial/ manufacturing base (chemicals, machinery & vehicles) is becoming obsolete in the current geopolitical conditions.
To mitigate the energy deficit and control the household bill, there will be more governmental measures to reduce demand. Countries will likely be capping energy prices and/or offering subsidies to avoid misery and civil unrest. To do so though, the EU will need easing measures like liquidity injection or Yield Curve Control - in harmony with the newly announced Transmission Protection Instrument - to keep sovereign bond yields coherent and avoid further fragmentation between countries. The above measures require a united EU and precise synchronisation with the US Federal Bank. It would weaken the Euro further but - without this bailout - the many industries in Europe that are already subsidized will collapse, and economic depression will be inevitable - leading to job losses, further devaluation of the Euro, and higher utility and debt/mortgage costs.
As long as Europe doesn't restore good relationships with Russia; as long as China, Japan and India don't reduce their LNG/oil imports, and as long as Europe fails to cover its energy consumption needs from other sources or reduce them, the supply of oil and LNG will get scarcer, which will increase speculation and volatility in the upcoming winter months. These dynamics will benefit the dollar and the well-established energy companies in the US, Asia, the Middle East and Africa.
Following this rationale, I will solidify my dollar and commodities positions between now and November. By owning some share of the energy businesses, I will take back a part of what I pay them directly and indirectly. I won’t hold these assets for the long term as energy demand always decreases around spring, and as I long for a cleaner and more durable energy system than the one the fossil fuels companies propose.
Here are some investment options I consider:
From top 10 energy companies:
Aramco and PetroChina are the most versatile players on the list and will most likely find ways to benefit from the current situation, even though there are sanction risks (especially with China).
ExxonMobil and Chevron have a lot of LNG and Oil reserves, tankers as well as gasification expertise.
Equinor ASA covers around 25 % of European natural gas - it is riskier as it could be affected by political bottlenecks in Europe's energy market.
Total Energies, Shell, and BP are also riskier, as France and the UK have been aggressive toward Russia and unexpected events are more likely to occur (especially for Total who is still active in the Russian Federation).
Considering the crucial role of LNG in Europe I also consider:
Cheniere Energy (LNG) - The largest LNG producer and exporter in the US, owning many LNG tankers.
EQT Corporation (EQT) - The largest non-LNG producer in the US with the world's lowest production cost.
An alternative to the above stocks would be to own energy ETFs like:
XLE - which tracks energy prices through 21 "blue chip" companies (mostly oil and gas in the US)
FENY - US companies (LNG, oil, coal, renewables)
FGC - (Natural Gas ETF)
These ideas are uncertain and depend on political factors that are hard to predict. If Europe finds a way to re-engage with Russia and/or if Japan turns on its nuclear plants to significantly cut its fossil fuel import, LNG and Oil prices should drastically fall bringing down the prices of the above stocks and ETFs. On the other hand, if Europe cannot find a solution to the Ukraine-Russia crisis by 2023, the US will have to increase its energy exports to the EU to protect its economic stability.
I hope my articles help you better understand the energy and crypto industries and motivate you to become more active and intentional in your financial future.
I welcome your comments, ideas, and questions.
Follow me on Twitter and LinkedIn
In April 2021 I wrote this piece on the role of rare-earth minerals in the renewable energy and energy storage industries. At that time, I had collated a portfolio of 21 stocks playing a key role in achieving more sustainable production, storage, and consumption of energy. I shared this list freely with those who reached out to me and still do. Since then, most of these assets doubled their valuation, and I must say they saved my portfolio as most of it is crypto assets!
I pointed out that the COVID crisis caused a collapse in the commodity/energy market and that was a good opportunity for investors to integrate commodities into their portfolios to prepare for the energy transition and to protect them against central banks' policies and the growing risk of "violent inflation". But I didn’t imagine the Ukraine situation would reach such proportions and that the EU would sacrifice its relationships with Russia. How would one have anticipated that the EU would cut off 40% of its gas supply - 155 billion m³ of pressurized liquified natural gas (LNG) from Russia's numerous pipelines rooting mostly from the Yamal Peninsula?
Now that inflation and the "Energy war" are ramping up, I’m sharing my thoughts on the current crisis and how to offset or even benefit from it.
Energy is a dirty business that causes environmental destruction and feeds multiple forms of tyranny. It is plagued by lobbies, gangs, wars, embargoes, sanctions, and the lack of investments in nuclear and geothermal energies. These make me think twice before investing in the energy sectors, but our positions combined won’t weigh much against these realities and I just don’t want to be a victim of this energy war.
Coal, gas, and oil represent the biggest source of the world’s electricity mix. The Ukraine war is constraining the supply of oil and LNG, and is totally reshaping Europe's energy system. First, we liquefy gas at -162°c to transport it in pipelines while Europe lacks gasification capacity and supply mediums as already maxed out. Most of Europe's spare capacity is in Spain, France, Belgium & Italy, and there are several bottlenecks for efficient distribution, including pipe flow direction, itinerary hurdles, and gasification terminals.
Gas demand in Europe is so important (22% of the global LNG import) that we will need to substitute it or reduce our demand amazingly fast to adjust to the supply shock. It is possible to see Japan (27% of global LNG import) turn back to its nuclear power plants, thus cooling the global demand for LNG, but this won't happen before mid-end 2023.
Europe uses gas mostly to generate electricity (35%), to feed heating applications (30%) and to run its industries (+20%). Substitution is Europe's only option not to experience blackouts, and it will be first and foremost driven by more imports of fossil fuels. Coal imports have already grown significantly and are expected to see a 43% increase in 2023 over 2022.
EU's industrial sector cannot keep competing with countries with much cheaper costs, and we will see more and more factories reduce output if not shut down. Although the euro has depreciated (which should boost exports), I genuinely believe that Europe’s industrial/ manufacturing base (chemicals, machinery & vehicles) is becoming obsolete in the current geopolitical conditions.
To mitigate the energy deficit and control the household bill, there will be more governmental measures to reduce demand. Countries will likely be capping energy prices and/or offering subsidies to avoid misery and civil unrest. To do so though, the EU will need easing measures like liquidity injection or Yield Curve Control - in harmony with the newly announced Transmission Protection Instrument - to keep sovereign bond yields coherent and avoid further fragmentation between countries. The above measures require a united EU and precise synchronisation with the US Federal Bank. It would weaken the Euro further but - without this bailout - the many industries in Europe that are already subsidized will collapse, and economic depression will be inevitable - leading to job losses, further devaluation of the Euro, and higher utility and debt/mortgage costs.
As long as Europe doesn't restore good relationships with Russia; as long as China, Japan and India don't reduce their LNG/oil imports, and as long as Europe fails to cover its energy consumption needs from other sources or reduce them, the supply of oil and LNG will get scarcer, which will increase speculation and volatility in the upcoming winter months. These dynamics will benefit the dollar and the well-established energy companies in the US, Asia, the Middle East and Africa.
Following this rationale, I will solidify my dollar and commodities positions between now and November. By owning some share of the energy businesses, I will take back a part of what I pay them directly and indirectly. I won’t hold these assets for the long term as energy demand always decreases around spring, and as I long for a cleaner and more durable energy system than the one the fossil fuels companies propose.
Here are some investment options I consider:
From top 10 energy companies:
Aramco and PetroChina are the most versatile players on the list and will most likely find ways to benefit from the current situation, even though there are sanction risks (especially with China).
ExxonMobil and Chevron have a lot of LNG and Oil reserves, tankers as well as gasification expertise.
Equinor ASA covers around 25 % of European natural gas - it is riskier as it could be affected by political bottlenecks in Europe's energy market.
Total Energies, Shell, and BP are also riskier, as France and the UK have been aggressive toward Russia and unexpected events are more likely to occur (especially for Total who is still active in the Russian Federation).
Considering the crucial role of LNG in Europe I also consider:
Cheniere Energy (LNG) - The largest LNG producer and exporter in the US, owning many LNG tankers.
EQT Corporation (EQT) - The largest non-LNG producer in the US with the world's lowest production cost.
An alternative to the above stocks would be to own energy ETFs like:
XLE - which tracks energy prices through 21 "blue chip" companies (mostly oil and gas in the US)
FENY - US companies (LNG, oil, coal, renewables)
FGC - (Natural Gas ETF)
These ideas are uncertain and depend on political factors that are hard to predict. If Europe finds a way to re-engage with Russia and/or if Japan turns on its nuclear plants to significantly cut its fossil fuel import, LNG and Oil prices should drastically fall bringing down the prices of the above stocks and ETFs. On the other hand, if Europe cannot find a solution to the Ukraine-Russia crisis by 2023, the US will have to increase its energy exports to the EU to protect its economic stability.
I hope my articles help you better understand the energy and crypto industries and motivate you to become more active and intentional in your financial future.
I welcome your comments, ideas, and questions.
Follow me on Twitter and LinkedIn
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