Disclaimer: This is not investment advice. Never trust any anonymous dude on the internet. PLEASE DO YOUR OWN RESEARCH !!!
Panic Update:
As to be expected, my last “panic post” marked more or less the (short term) peak in Natural Gas and Electricity prices in Europe. Since then, prices have gone down more than -50% from the peak. Nevertheless, prices are far from normal and sustainable. Governments have already proposed action in the form of intercepting the markets.
In the recent days, I have seen more and more “models” that seem to tell us that Germany/Europe is fine for this Winter and after that everything will be smooth sailing (LNG terminals, French deliveries etc.), despite the Russian completely halting NS1 deliveries last week and not reinstating them based on phony reasons.
I actually started to build a model myself but then decided to focus on the big picture instead. As I argued on Twitter, the one big variable that will determine how Europe is doing will be the temperature.
However, independent how this winter will be, Natural Gas will be a scarce resource in Europe for some years to come. Even in the (low probability) case that there will be a quick end of the Ukraine conflict, Europe will not and cannot go back into the Russian dependency. On the other hand, switching to LNG at acceptable prices will take a few years until enough liquification, gasification and transportation capacity is available.
This recent article in the FT quotes the boss of Shell:
“It may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, through rationing and a very, very quick buildout of alternatives,” he said. “That this is going to be somehow easy, or over, I think is a fantasy that we should put aside.”
Another German language article quotes several Oil and Gas executives that it takes at least 3-4 years until Russian Gas can be fully replaced.
So my base case for the coming 3-5 years will be: There is not enough Natural Gas (ex Russia) available in Europe and Gas and electricity will remain very expensive in Europe.
The only real option: Decrease Demand
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