Month: October 2021

Authored by Bill Blain via MorningPorridge.com,

For many months myself and many of the investors I work with have become increasingly concerned at the growing instability and insecurity of energy markets. The 4 times spike in Gas prices this year has been a shocking wake-up call, highlighting energy insecurity in Europe and particularly the UK. Gas prices will remain elevated for months to come. The consequences are going to be brutal – and fatal for some.

Energy – whether derived from fossil fuels, nuclear or renewables – is a commodity and the critical thing about commodities is: “You can’t print commodities like you can print money. The rules are not the same,” says my good friend and head of commodities at Shard, Ashley Boolell.

Commodities are volatile and dangerous. Oil has doubled in recent months. But the thing about Gold, Silver, Palladium and copper prices is; no matter how volatile they are, they are simply investment opportunities or traps, and are unlikely to kill us.

Energy is different. It can kill us.

That was conclusively demonstrated earlier this year in Texas. A swift series of winter storms crashed the Texan grid when gas infrastructure failed in the cold, renewables weren’t delivering, and the deregulation of its energy system had delinked Texas from both US power Grids – making it difficult to import energy. Over 200 people died as a result of power outages.

Fast forward to this winter, and the UK and Europe are in the direct firing line of the coming energy storm. The security of energy supplies has never looked less certain. In the UK, neglected storage means we have the capacity to story 3-4 days of Gas. The recent collapse in sterling has been linked to the panic over Petrol supplies, escalating and cascading supply chain failures impacting industry and growing woes blamed on Brexit. I would add questions about how the UK’s status as a first world economy with zero energy security will line up.

How has this happened? Why?

Well… that’s a long tale… But, it will be mightily embarrassing for the Boris Johnson Government if the first UK power outages occur during the COP26 Climate Circus in Glasgow in November.

COP26 has driven the Government’s agenda and ambition to be seen as more green, more carbon neutral and more ESG than anyone else. I’ve heard tales of cabinet ministers throwing sweary hissy fits when asked to support policies that don’t immediately square with green policies perceived as vote winners.

As I’ve written many times – ESG is well intentioned, but perhaps the most dangerous force in Economics today.

Investment managers rely on people giving them money to manage. That is why every single fund manager on the planet is fixated on polishing their green credentials, demonstrating how they are funding ESG compliant investments, and eschewing anything even vaguely linked to hydrocarbons. It is also why Saudi Arabia is polishing its credentials by improbably launching and successfully selling a Green Bond.

The result is a chronic failure of common sense across the investment industry.

Fund managers claim to be investing in our futures. If that is true – how do they expect the world can transition seamlessly from dirty hydrocarbons to clean renewables overnight? It takes 20 years to get planning and build a nuclear power station – while wind is proving fickle, unreliable, far less efficient and difficult to maintain.

The brutal reality is we can’t decarbonise the global economy overnight. Over 30 years.. perhaps! Through the transition period we will still need power and energy derived from the old dirty hydrocarbons. Powering up EVs, making the fuel for hydrogen planes and trains, will all require hydrocarbon derived energy. That’s fact.

Instead, ESG investment compliance means all the gas in our offshore waters that could have powered the UK to becoming a truly carbon-nuetral, energy secure state in 20-30 years time is untapped and un-investible. For now – the skills to tap it are already disappearing.

ESG has evolved into a religion, a high church of environmental orthodoxy. Its heretical to suggest ESG can’t work unless we evolve towards a cleaner energy ecosystem by continuing to burn hydrocarbons. A crisis this way comes: for all the posts on Linked-In boasting about green investments, or the industry awards for Green Bond of the year, or the multitude of certificates one can earn on ESG investments – it will all count for nothing this winter.

This winter – people are going to die of cold.

As the price of energy goes higher, the costs will fall disproportionately upon the poorest in Society. Income inequalities will be dramatically exposed as the most vulnerable in society face a stark choice: Heat or Eat.

That has all kind of social consequences. Can you imagine how the Gillet Jaunes in France will react ahead of the French elections in April? And what about the prospect for riots as fuel prices hit the poorest communities and ethnic groups in the UK?

This winter the UK is likely to be on its knees begging energy from wherever it’s available. Europe will be in as much trouble. The Middle East will be charging whatever they can get away with, and the capacity to deliver is limited. The much vaunted energy-independence of the US will be tested – it unlikely they will be minded to export. That will leave government with a stark choice – let people freeze or pay the cost, probably triggering a balance of payments crisis and a further confidence crash in sterling.

The likely source of Gas will be Russia. And Vladimir Putin can’t wait.

The coming Energy Crisis will be his grand opportunity. Remember the famous photo of him with Angela Merkel and his dog prowling in front of her? Putin knew she has a terror of dogs so he deliberately intimidated her. He won’t deal with Europe. He will invite each European leader to plead their case individually, menacingly asking each leader why he should open the Gas Taps to their nation specifically.

Covid 19 was the first big test for Europe. Its’ vaccine programme failures could have been disastrously fractious for the EU. When faced with a European Energy Crisis and Russia holding the cards, what’s to stop countries doing deals? Who will crack first? Poland? Germany? And what will Putin expect in return? Legitimacy?  A free-hand to deal with domestic dissent? Sanction ending? A free hand in Ukraine or even the Baltics? It rather depends on what price he thinks he can force Europe to pay.

And what will Putin ask of Boris? That London reopens its door and markets to the kleptocracy he leads? Or something more…?

Make no mistake, this winter is going to be shocking. Be aware.

A newly penned letter to the FT, signed by professors from Oxford, Harvard and American University alongside a group of environmentalists, is urging that Germany postpone its exit from nuclear energy for benefit of the environment.

Noting that many Germans aren’t happy with the job politicians are doing addressing climate change, the letter notes that Germany’s “emissions are rising sharply again, at a time when they need to be falling fast”.

Emissions in 2021 “are forecast to stand at only 37 per cent below the 1990 baseline level, still 3 per cent short of the 2020 target of a 40 per cent reduction (which has in effect been missed),” the letter says. 

The country’s next goal of a 65% cut by 2030 is in “serious jeopardy”, it argues. 

The letter then notes that Germany “is not taking full advantage of all possibilities” and that it is shutting down nuclear reactors two decades ahead of when it needs to. These nuclear reactors produce “8 gigawatts of low-carbon power generation, presently meeting 10 per cent of national daytime demand”. 

The letter urges the postponement of shutting down these reactors, as other types of renewables come online in the interim. The letter forcefully concludes:

There is still time to set matters straight. Germany could yet alter course and adjust its order of priority to exit coal before nuclear. All it would take is the stroke of a pen to reinstate the former life extensions, agreed in 2010, to the plants to between 2030 and 2036.

Is any politician brave enough to implement this concrete change that would unequivocally make a positive impact upon emissions, at what is a critical moment in the climate crisis? This emergency action — a postponement of the nuclear exit, not a cancellation — would rightfully earn the respect of the younger generation.

Recall, just days ago we wrote about Poland’s second largest energy consumer considering a move to small modular reactors to help generate energy. 

Noting that finding cheaper and greener sources of energy was in Poland’s “national interest”, KGHM’s CEO Marcin Chludzinski said the company would be building four small modular reactors for alternative energy. Each reactor would have a capacity of 77MW. 

Days prior to that, we added to our ongoing case for uranium by posting about how crypto miners were starting to forge partnerships with nuclear power plants to combat the “bitcoin is not good for the environment” argument. 

Authored by Paul Joseph Watson via Summit News,

Despite a massive PR push to encourage vaccination, only seven of the twenty Premier League football clubs have more than 50% of the players in their squads fully jabbed.

The figure was revealed in a Sportsmail report about a Premier League plan to “reward” teams who have a high vaccination rate, with football authorities seemingly concerned about low uptake.

“According to the data we have, only seven clubs’ squads are more than 50% fully vaccinated, so we have a way to go,” said a briefing note sent by the Premier League.

At least two Premier League clubs have no more than six players vaccinated in their entire squads, which often comprise more than 25 players.

The Premier League wants to reward “squads/players who are most Covid-compliant and who have opted to be vaccinated,” although what that reward would entail isn’t clarified.

The Premier League fears that vaccine passports for international travel will become commonplace, placing at risk players’ participation in foreign soccer tournaments.

As NBA star Jonathan Isaac eloquently explains in the clip below, there is absolutely no reason for a healthy young athlete to take a COVID-19 jab, given that the side-effects of the vaccine (no matter how rare) pose more of a threat than the virus itself to physically fit men in their 20’s and 30’s.

Orlando Magic’s Jonathan Isaac says he isn’t getting the covid vaccine because he has natural immunity and data shows he isn’t at risk at all from covid. Well said: pic.twitter.com/AJmvlNRyff

— Clay Travis (@ClayTravis) September 28, 2021

Sports stars are obsessed with health and fitness and obviously do more research than most people about what they are putting into their bodies.

No surprise then that many of them continue to reject the vaccine despite the overwhelming pressure imposed by the media and sports authorities on them to take it.

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The North Atlantic Treaty Organization (NATO) exists for the sole purpose of facilitating a political and military alliance between almost 30 countries. All are obligated to one another in times of war, but, as Visual Capitalist’s Avery Koop notes, some countries have much stronger militaries and defense systems than others.

Using data from NATO, this map reveals what each NATO member country spends on its own national defense.

Note: Numbers are 2021 projections.

Biggest NATO Defense Spenders

The U.S. spends more on defense than any other NATO country.

According to the 2021 estimates, U.S. defense spending will be close to $811 billion this year. On the other hand, the defense spending of all other NATO countries combined is projected to be $363 billion, meaning the U.S. will outspend all other countries by a whopping $448 billion.

 

NATO is based on building up forces and equipment for the goal of joint security and defense. And, despite the pandemic, many members did increase their spending in 2020.

 

However, not all countries contribute equally. The agreed-upon target for European NATO members, for example, is to spend 2% of GDP on defense by 2024, but many countries are not on track to meet this goal.

Who Pays for NATO Itself?

One of the key pillars of NATO is collective defense: a commitment to the idea that an act of violence against one or more of its member states is an act of aggression towards all.

Collective defense, cooperative security, and crisis management are at the heart of NATO’s purpose and operations.

Apart from defense spending, running a transcontinental political alliance costs around $3 billion annually. So which countries foot the bill for these expenses?

 

Members have pre-arranged mechanisms to divide NATO alliance expenses evenly.

 

Getting into specifics, the members are paying for:

• Civilian staff wages and overhead costs of running NATO headquarters.

• Running strategic commands, joint operations, early warning and radar systems, training, etc.

• Defense communications systems, harbors, airfields, and fuel supplies.

The Future of NATO

While outright nation-on-nation conflict is becoming more rare, threats to the collective security of NATO allies have not disappeared.

While countries may have differing opinions over the exact amount each should contribute, rising expenditures are a sign that NATO is still a priority for the near future.

The United Kingdom is short 100,000 qualified truck drivers after tens of thousands of them returned to the European Union during Brexit, and 40,000 heavy goods vehicle (HGV) driver tests were suspended because of the virus pandemic in 2020. The lack of drivers has roiled supply chains, resulting in higher logistical costs that could make the price of food and anything else hauled by trucks more expensive ahead of the holiday season. 

The “Winter of Discontent” is starting to become a reality for millions across the world’s fifth-largest economy as a deficit of truckers triggered widespread fuel shortages this week. There’s also been a shortage of natural gas from Russia that has pushed UK wholesale natgas prices to record highs has transformed the country’s power industry into a chaotic mess. Soaring prices and shortages are reminiscent of the late 1970s and may worsen in the months ahead.

The government announced Sunday temporary visas for 5,000 foreign truck drivers to alleviate extremely stressed supply chains, but that may be a hard task to fulfill considering the deficit is so wide. Truckers who spoke with Reuters said their wages are going up because they’re in high demand, and in return, the cost of everything will rise as well. 

“Wages will have to go up, so prices for everything we deliver, everything you buy on the shelves, will have to go up too,” Craig Holness,51, British trucker with 27 years of experience, told Reuters. 

Hauler and recruitment companies are struggling to fill the deficit. One online job posting offered 75,000 pounds ($102,500) per annum salary for HGV Class 1 drivers. 

“With HGV drivers, we’re now paying them 40% more than we were four months ago,” said Jordan Francis, the commercial director of recruitment agency ProDrive. 

Holness doesn’t believe the trucker shortage will abate anytime soon because the deficit is so large. He said no young person wants to do this job because the conditions are poor. 

“Who wants to be a lorry driver – you’d be better tapping away on a keyboard wouldn’t you? Kids these days don’t want to know,” said Holness. “I want to get out.”

Miguel Brunel,41, a truck driver from Bethune in northern France, said, “this is chaos,” while referring to the deficit of drivers in the UK.

The British Retail Consortium, the retail industry’s lobby group, told the government last week that new HGV drivers need to be found in the next ten days to avoid significant disruption in the run-up to Christmas. 

“HGV drivers are the glue that hold our supply chains together,” the retail group said. “Without them, we are unable to move goods from farms to warehouses to shops.”

From turkeys, toys, and trees this upcoming holiday season, millions of Brits could be in for a price shock or at least some kind of disappointment as supplies could be exhausted. 

This could be problematic for Bank of England Governor Andrew Bailey who said this week that he’s laser-focused on the inflationary effects from supply shortages including labor.