Germany Bails Out Utility Hit Hard by Russian Gas Shortfall
WSJ Headline today
Germany had to take a 30% stake in Uniper which is paying higher natural gas prices. Yes the Nord stream Pipeline (approved by Team Biden unlike the Keystone Pipeline) re-started but only at 40% of capacity. Yet oil and gasoline prices fall in the USA, what’s going on?
Recall that oil trades in the international markets in U.S. Dollars, still the World Reserve Currency. Saddam Hussein wanted oil to trade in Euros, anything but the U.S. Dollar. He was overruled.
After problems at the Fukushima nuclear plant Japan shut down its nuclear generating capacity. With no apparent problems in Germany, Angela Merkel then shut down both coal and nuclear plants in Germany. This left Germany dependent on Russian oil and natural gas.
Putin was surely smiling at his good fortune. EU purchases of his energy would finance his Ukraine invasion. Yes at first oil prices here soared to $120. Now crude trades around $100. The reason is the collapse in the value of the Euro versus the U.S. Dollar. The Euro topped in February prior to the Ukraine invasion at 116. It hit parity with the U.S. Dollar, at 100 this past week. As noted in the last two columns, crude oil has been trading far higher than the distant delivery months. The result of this backwardation and the weak Euro, has been a lower price for oil when valued in U.S. Dollars, got it?
But Putin and Xi are far stronger players than Saddam. The Saudis have suggested they will sell oil for the Chinese Yuan rather than the U.S. Dollar. Recall China also started the Asian Infrastructure Investment Bank, and no its currency is not the U.S. Dollar. No wonder Team Biden was hat in hand in Saudi Arabia last week.
The stock market has exceeded the June 28 high. Focus is now on the early July highs at 33,250 on the DJIA. This next week will reveal what the FED does and the market reaction. Expect a pull-back in stocks before an assault on 33,250. Bond prices are on hold.
Team Biden is really Team Obama II. And their fantasies of electric cars won’t die. Ford announced it will lay off 8,000 workers to finance another $50 billion investment to be able to move from 27,140 EVs to 2 million by 2026. This is totally unrealistic. Notice has been that 63% of Team Biden has never worked in business. Hence, the pie in the sky predictions. Japan is now re-opening its nuclear facilities and Germany is putting their shutdown plans on hold, no wonder.
Various pundits are announcing the ‘correction’ in stocks has ended. I doubt that with Putin in charge of EU energy and the intersection of so many cycles in late 2021, and unrealistic expectations for automobiles worldwide, the story is not over yet. Expect a stock rally into early fall and then the dangerous days of October-November will be upon us.
