Europe's energy crisis has 'no end in sight' as the perfect storm continues to rage on. Here's what you want to know.
Russia's war on Ukraine isn't the only reason for Europe's energy crisis — EU policy and extreme weather also haven't helped.
Below, I break down the other variables contributing to Europe's perfect storm.
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1. Pieces of the crisis were in place even before Russia invaded Ukraine. And Russia's weaponization of energy has brought those variables to light over recent months.
Natural gas is becoming increasingly expensive, with Dutch TTF futures more than 1,000% higher than a year ago, and more pain could come as Russia's Gazprom shutters Nord Stream 1 this week.
Electricity costs, too, have soared.
"Last week Europe awoke to a bitter truth: the energy crisis is here to stay," Bank of America analyst wrote Monday.
Now, EU nations are scrambling to find alternative resources, with coal in particular emerging as a key commodity.
The move marks a reversal for Europe, as it had been closing down coal plants for years due to climate initiatives.
"Before the war, Europe had wanted to be a leader in decarbonizing, and that's worked out to a certain extent with wind and solar, but they made a choice to place significant reliance on Russia," portfolio manager Rob Thummel told me.
He added that, after years of underinvesting, coal is now harder to access and more expensive.
Nonetheless, Europe has little choice other than to fire up shuttered plants because that offers a faster solution than trying to build out brand new LNG facilities, he said, adding that it'll likely take the continent several years to build up the infrastructure to get out of the crisis.
On top of all that, weather has emerged as a key antagonist for Europe, too.
Extreme heat waves have led to declining river levels, which limits shipments of coal and other key supplies.
What's more, less river water means less hydro-electric power generation, and less capacity to ramp up nuclear operations, according to Bank of America.
"With the war in Ukraine becoming increasingly entrenched, the European energy crisis seems to have no end in sight," BofA said.
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5. Jerome Powell finally sent the right message at Jackson Hole about the central bank's commitment to fighting inflation. That's according to economist Mohamed El-Erian, who has criticized the Fed in recent months: "He should have done that months ago."
6. Uranium stocks soared on Monday after Japan signaled openness to more nuclear power and Elon Musk applauded the alternative energy source. Japanese Prime Minister Fumio Kishida said last week that the country would evaluate the potential build of new nuclear power plants, while Musk voiced his support on Twitter.
7. Wharton's Jeremy Siegel said the Fed is at risk of tightening policy too much and it's not clear what inflation indicators Powell is watching. To the professor, the Fed Chair's speech last week was "unsatisfactory" in drilling down into specifics regarding inflation. Get the full details here.
8. A billionaire oil-refining exec who called the July top explained why crude could plunge by another 25%. If demand at the pump continues to drop, oil prices could follow suit and thus signal inflation is easing, he explained. He also broke down a solution that could curb a possible recession.
9. These 15 top stocks will enjoy superior returns over the next year, according to Morgan Stanley. The firm just released its annual Vintage Values list, which outperformed the market last year. The grouping is based on both fundamental and quantitative analysis. These are the names to know.
10. Digital World Acquisition Corp. extended its four-day decline on Monday. "The Fake News Media is devastated by how well TRUTH is doing so, quite on cue, they are working overtime to criticize and demean it," former president Trump wrote. Here's how the stock is moving.
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