Energy Report: The Worst Case

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If you had to write a novel about the worst-case scenario for the global energy markets, we’re seeing it unfold right now. The Russian invasion of Ukraine is causing death and destruction and is due to, in large part, by bad, short sight energy policy. Brent crude oil almost hit $107.00 a barrel and WTI over $100.00 for the first time since 2014. We are also seeing the price of wheat go limit up, corn as well and the possibility of the liquidity crisis is rising as people must liquidate their positions.

Despite early reports that oil and gas flow outside of Russia was not being impacted, it appears that at least in the short term those reports might have been overly optimistic. Fox Business Network is reporting that a major oil export area out of Russia has been shut down in the Seas of Asov. This means that supply is being disrupted. We do not know for how long, this is not good.

Reuters is reporting that “Major buyers of Russian oil struggle with bank guarantees. “Banks are not willing to open LC’s for the moment so it is a bit of a standoff,” one source said. He asked not to be named due to the sensitivity of the issue. If oil can’t be paid for. then oil will not ship. This is not good.

Fox Business Network reports that at a news conference Thursday, the president of the European Commission said its member nations plan to impose their “strongest” and “harshest” economic sanctions against Russia following its invasion of Ukraine. “We will present a package of massive and targeted sanctions to European leaders for approval,” commission leader Ursula von der Leyen announced in Brussels, according to the Associated Press. The proposed sanctions will be aimed at blocking Russian access to technologies and markets that could help boost its economy and prevent Russian banks from accessing Europe’s financial markets, Von der Leyen said.

The news conference went on to say if approved, the measures, “will weaken Russia’s economic base and its capacity to modernize. And in addition, we will freeze Russian assets in the European Union and stop the access of Russian banks to European financial markets.”  The European Union would be acting in concert with the United States, Canada, Britain, Japan, and Australia against Russia, according to the AP report.

There are reports that the Biden administration in Europe may try for a Hail Mary and try to push through an Iranian nuclear deal Yep, that isn’t a done deal and one would have to fear that if they push through a deal, that more than likely it would be a bad deal for the West in the long run.