Schindler Financial Newsletter Q1 2022 - Follow-up
Sanctioning Russian energy imports as an additional “Boots off the Ground” strategy to deter Russia is a multi-sided coin with worldwide supply disruption implications. Lowering supply with the same or higher demand typically leads to higher prices. In the U.S. and Europe, we are already paying higher prices for fuel to drive to work and heat our homes in an already inflationary world. Recall, Russian gas and petrol products account for about 40% of the European Union’s natural gas imports, yet less than 8% of the U.S.’s petrol-crude imports before the U.S. government’s import ban.*****
Overall, in Russia, oil and gas provided 39% of the federal budget revenue and made up 60% of Russian exports in 2019. The goal of sanctioning imports of Russian oil is to choke Russia’s military budget and create public discontent with Putin. However, how long will European and American voters tolerate higher prices?
Do you agree with President Zelenskyy statement to congress that “Peace is More Important than Income?:†
Natural Gas 2022, 1-Year Data, Trading Economics.com††
The backdrop to all of this is the European Union’s realization that no matter how long or how severe the Ukrainian conflict lasts they might want to ultimately end their dependance on Russian energy to end Russia’s political and economic leverage. Hopefully, the West and East will step-up it’s development of green or cleaner energy sources such as solar, wind, hydro, etc. In the meantime, the most abundant sources of energy are natural gas, crude oil, and other fossil fuels. Natural gas is a cleaner (yet environmentally unfriendly) fossil fuel that the U.S. can export while the world develops green energy.
We are watching a multitude of exchange traded funds (ETFS) which hold securities that produce, store and transport natural gas and are benefiting from rising natural gas prices such as AMLP, MLPA, and MLPX. We are also watching green energy ETFs as some prices have come down to earth after a meteoric rise in 2021. Green energy as a potential replacement for oil and gas, including dependence on Russia, is regaining attention.
We do not know when this war will end and how long some market sectors will remain in correction mode. However, we are now seeing buying opportunities. Keep in mind that security prices could go down before they go up. We are in this for the long-run.
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