OPINION: The world may be waiting to see if Russia will strangle gas supply to Europe, but energy stocks are in a bear market as investors weigh up recession fears.
maintenance on the Nord Stream pipeline
that transports gas from Russia to Germany’s industrial heartland begins on Monday night, politicians and business leaders are nervously wondering whether gas flows will be restored after the usual 10-day shutdown, or whether Russia will play its key bargaining chip and refuse to turn the gas back on at all.With parts of Germany already facing energy rationing, government ministers are preparing citizens for the worst.
The emergency that would hit Germany and Europe more broadly if Russian gas stops flowing is ugly. But as, the impact of gas shortages during the northern hemisphere winter could threaten the European Union itself, as energy rationing leads to an every-country-for-themselves scenario. The impact of a Russian gas blockade would also be felt in other parts of the world, including gas-hungry Asia, where Japanese news agency Nikkei says Japan is preparing a framework that will allow it to curb gas use. The country is already asking citizens to cut their energy consumption.This volatile environment suggests extraordinary tightness in global energy supply and the potential for big profits for energy producers.
Having delivered investors big gains in the first five months of the year – Vanguard’s energy index ETF climbed 61 per cent from January 1 to June 8 – the speed with which the sector has fallen into a bear market, by falling 23 per cent since then, provides a fascinating contrast to the anecdotes of
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