Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

The Real Way the West Can Impact Ukraine

Politics / Natural Gas Mar 06, 2014 - 10:48 AM GMT

By: Money_Morning

Politics

Dr. Kent Moors writes: The weather is taking a decidedly better turn here in London these past few days.

It's a good thing, because all of the talk currently in British circles is about the deteriorating situation in Ukraine.

These concerns involve the all-too-obvious geopolitical impacts of a Russian takeover of Crimea and perhaps a broader swath of Eastern Ukraine.


However, there is another matter that has a more immediate impact on Europe, especially if the temperatures start falling again.

You see, despite the Russian-controlled natural gas pipelines under the Baltic Sea to northern Germany (Nord Stream) and across Belarus to Poland, most of the Russian natural gas coming to the continent still passes across Ukraine - about 80% in fact.

And Europe is still reliant upon this energy flow despite attempts to diversify.

That means the longer the crisis between Russia and Ukraine remains unresolved, the higher the tension level among Europeans will be.

Here's what that means...

Confronting a Critical Moment

The good news is that the situation is stabilizing. Not improving, mind you, but at least not becoming any worse. Stock markets in both London and in Europe are beginning to recover from recent massive declines.

But every economy needs to guarantee reliable sources of energy. Europe is hardly different in this regard. The massive hit in the investment markets from a possible interruption of the gas flow is hardly going to be a reassuring one.

The connection here is rather immediate and comes at a critical time. Despite a few improvements, both European economic prospects and credit markets are showing signs of another slide. Unemployment remains high, financial indicators are moving south, and the likelihood of another interruption in Russian natural gas is hardly encouraging for either the residential or industrial end user.

This is anything but an abstract concern. Everybody here remembers all too vividly the last Russian-Ukrainian spat. Back in January 2009, during one of the continent's coldest snaps in recent history, a disagreement broke out between Gazprom and the Ukrainian national gas company Naftogaz Ukrainy.

That resulted in a complete halt of the Russian gas pass-through across Ukraine, and some very cold folks further west. Now these concerns are already surfacing again.

Take earlier this week, for example.

Having just left our annual energy consultations at Windsor Castle, I found myself a guest in Bloomberg TV's London studio. The discussion quickly centered on the impact of what was transpiring in Crimea for gas prices in the European Union (EU) and the UK.

Even as crude oil prices spiked yesterday in both London (where the Brent benchmark price is set) and New York (West Texas Intermediate, or WTI), the attention was more directed at the level for natural gas.

In the United States, we usually view natural gas prices as essentially a function of the weather. In the winter, as has certainly been the case this year, waves of "polar vortex" temperatures from the north prompt additional drawdowns from gas stockpiles and an increase in futures contract pricing.

A similar connection exists during the summer. Then, however, a rise in temperatures results in additional gas consumption as more electricity generation moves from coal to gas as a primary fueling source. In addition, with gas-based propane being the primary energy source in rural America, the price of that gas has a rather direct effect on a whole range of agricultural products.

A Growing Dependence on Natural Gas

Nonetheless, as I have remarked in Oil & Energy Investor on several occasions, there are additional demands kicking in for gas - from an additional rise in power generation, through feeder stock for petrochemicals, vehicle fuel, added industrial use, to the advent of a significant rise in global liquefied natural gas (LNG) trade.

As a result, an appreciable rise in gas prices or an interruption in its supply will have significant and broader economic consequences. Given the recent policy moves in Europe, some of these are rather unanticipated.

One of these has already been underway because of other EU energy decisions. A concerted effort to move an increasing amount of energy usage from traditional sources to renewables has been underway for some time. This has been led by a German decision to close nuclear power plants in favor of solar and wind energy.

But the short-term consequences of this move are different than what was originally thought. Germany is now importing an increasing amount of electricity from France generated by nuclear power plants, while also increasing its dependence on imported coal from the United States.

Meanwhile, coal is also becoming a more relied upon "solution" for British energy needs in the face of increasing questions about the availability of affordable gas. This is an especially sore spot for British consumers, since all five of its main gas providers have recently increased their prices well beyond the actual rise in the cost of the gas itself.

Therefore, the positive environmental spin coming from EU headquarters in Brussels and the German government in Berlin over clean energy has suddenly taken a backseat to the more pressing reality of keeping folks warm.

And nobody I have spoken to believes the energy mix will improve now that a prolonged Russian-Ukrainian impasse is unfolding.

Where We Go from Here

The new government in Kiev will not cave to Moscow, and the Russian decision to take over Crimean military bases will not be reversed regardless of what communiques are issued from Western capitals.

Uncertainty over the gas flows will begin having a negative impact on European market recovery prospects. One result will be increasing attention given to LNG imports and added gas supplies from North Africa and an increasing reliance on Russia's Nord Stream connection via Germany.

But the bulk of gas moving into the continent from Russia is still dependent upon Ukrainian pipelines.

And that brings up yet another example of how global politics sometimes results in the strangest of maneuvers.

While condemning the Russian moves in Crimea, Brussels and London will need to provide financial assistance to the Ukrainian makeshift government in Kiev.

One of the demands that will be insisted upon in return for aid is a guarantee that Kiev will keep the pipelines open - and continue to deliver Russian gas to a concerned Europe.

Source : http://moneymorning.com/2014/03/06/real-way-west-can-impact-ukraine/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules