The Kremlin Shuts Down Vital Oil Pipeline and Drives Up Inflation
Energy Crisis To Hit Europe First, Then Possibly U.S. Pocketbooks
One of the biggest truths we're all dealing with these days is the cost of electricity. This is a global crisis, particularly in Europe, where the cost of electricity is up 10X from a year ago. No, not 10%, 10X, which means what used to cost $10 is now $100. People who used to be spending $100 a month on their energy bill are now paying $1,000.
The European Commission is trying to solve this dilemma. Energy prices are based on oil and natural gas prices, and we don't have enough oil or natural gas flowing into Europe. And it's all because of the war. The Russian government has shut down the oil pipeline there, strictly reducing the amount of natural gas that they're allowing to flow into Europe. And what they are providing, they're selling for too high a price. The CEO of Shell says Europe is going to have to ration energy for years to come. This is a huge issue, way more expensive than the decade long average in line with a 14-fold increase in the cost of gasoline.
And the irony of all this, the horrifying part is that Moscow is now making more money from oil than it did before the war. Russia's pumping almost as much oil as before and selling it for higher prices. Who are the buyers? Pakistan, India, and China predominantly. Russia has earned $20 billion a month this year selling its oil versus $15 Billion before the war started. And they've got new markets. The Middle East, Saudi Arabia, United Arab Emirates, the UAE, and Egypt - they're all buying in addition to India, Pakistan and China and Turkey. India, in fact, is now Russia's biggest customer.
Countries Don’t Want to Buy Russian Oil, But They Are – In Disguise
Russian exporters are often labeling their oil as coming from Iran or Venezuela to fool buyers who really don't want to support Russian oil exports. It's becoming a really big problem, and it's contributed to the fact that the euro has fallen 15% in the past year. It fell to a 20 year low in August, and now investors are saying it's going to fall in value even more. Most contracts in the options market are against the euro than at any time since the start of the pandemic back in March of 2020. In other words, most investors are betting that the euro is going to fall even further than where it is now. And this is all because of the energy problem, which is sharply contributing to the inflation problem in Europe.
The euro inflation is running at 9%. So what are the countries around the world trying to do about it? Well, the G7 countries (these are the seven biggest economies in the world), have all agreed to put a cap on the price they're willing to pay for Russian oil. The United States, Great Britain, France, Germany, Italy, Canada, and Japan have all said we're not going to pay beyond a certain amount. What was Russia's response to this? The Kremlin called this an absurd decision that would further destabilize the oil markets.
In other words, the war that's going on is not merely devastating life in Ukraine, causing thousands of deaths - this war is rapidly becoming an economic war, and it's leading to policy changes here in America.
The Diablo Canyon Nuclear Power Plant in California, is scheduled to close in less than three years. But the governor of California, Gavin Newsom, who has long supported the shutdown of this nuclear power plant, has changed his mind. He now wants it to keep operating for another decade to 2035. Why? Because the Diablo Canyon Nuclear Power Plant provides 9% of California's energy and 17% of its green energy.
So basically, the governor is forced to acknowledge if we want to keep providing energy to Californians, we're going to have to continue tolerating nuclear power, which is, by the way, a green energy. Well, for as long as it doesn't blow up anyway.
California Dreaming – Without a Car
California is also giving $1,000 to everybody in the state who doesn't own a car. If you're making up to $40,000 a year ($60,000 if you're married), they are going to give you $1,000. Their way of saying 'we're going to reward you for not owning a car and therefore not contributing to CO2 emissions'. It will also support the use of public transportation and so on. So we're finding states here in the US taking decisive action because of the energy crisis, all of which has been instigated by the war in Ukraine, by Russia.
The situation is bad, likely to get worse before it gets better. You need to be willing to tolerate this uncertainty and volatility, which is likely to be with us for quite some time before it all gets resolved. And that means you need to be looking for the long-term, focusing on the long-term results, because the next months, perhaps quarters, even a couple of years could be rather dicey, indeed. And that's The Truth About Your Future.