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After a few days of meetings with energy financiers and insiders here in Paris, one thing has become clear…
And I needed to warn you even as we're getting ready for our flight back home to the United States.
It involves the changes underway in the European energy sector… and how they may impact us on the other side of the pond.
The effects on your utility bill could be dire…
European "Energy Nationalism" Has Meant More, Not Less, Energy Imports
You see, Europe has always had a problem in balancing domestic market conditions with the adequate availability of energy sources. In the United States and Canada these days, that balance can occur largely within the home market, because of abundant locally available crude oil, natural gas, and (in the case of the U.S.) coal.
In contrast, European energy expectations gravitate around cross-border allowances and concerns. This was one of the driving forces behind the impetus in the 1960s and 1970s resulting in the move toward a European Union.
Today, the energy prospects for the UK and Norway in the North Sea are declining. Meanwhile, the drive for nationally produced shale and tight gas is running up against political opposition in France and Germany, while basin disappointment and technical problems plague such development in places like Poland.
Against a backdrop of rising nationalism, the continent has found itself staring at increasing dependence on imports – pipelines from Russia, liquefied natural gas (LNG) from North Africa, and even more coal from the United States.
Policy goals and economic realities are moving in opposite directions…
The UK Is Already Paying More for Energy in the Name of Independence
It's in this collision of nationalistic goals and the real condition of market demand that an unwelcome realization is dawning. The necessary balance between the two may be quite elusive to reach.
The UK has already felt this pressure.
A high court decision has required that Parliament dictate the schedule for Brexit (the departure from the EU obliged by last year's unexpected vote), guaranteeing considerable political jockeying in Westminster, and neither help nor understanding from the EU headquarters in Brussels.
Some of the result, however, is already manifest. The British pound sterling has declined to multidecade low exchange rates vis-à-vis other major trading currencies. That has resulted in the apparently paradoxical export of UK-produced natural gas to hubs in the Netherlands and Belgium as volume migrates to better profit margins in a weakening forex environment.
The disadvantage to average British citizens is compounded when it's realized that, especially this time of year, the gas is then imported back into the UK at higher prices with the local utilities raising their arms in an apparent inability to respond.
That's long hand for the normal response by the distributor: commiserate with the end user but pass on the increased cost of doing business to them. The effect on households, industry, commerce, and employment is inevitable.
This has been th…
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.