The recent rise in natural gas prices has hit Europe hard with a wake-up call that relying on energy imports from warlike countries is a dangerous business.
Hopefully, governments across the continent will rethink their energy policy and allow the extraction of natural gas from European soils.
Many Americans know that the price of natural gas has risen by about $ 5 per cubic foot from about half six months ago. It’s a lot, but think about how much it will cost in Europe: $ 15. Some analysts predict even higher prices by the end of the year.
This winter, when the cold climate arrives and people need to warm their homes in places such as Germany, France, England, Ireland and Scandinavia in Northern Europe, it will make life very difficult.
Finger pointing straight to Russia
But that’s just one problem. Another problem is that Russia is Europe’s major energy supplier, including natural gas. And recently, the Kremlin has been accused of using its possession of natural gas supplies as a weapon in economic warfare. Simply put, Russia has been accused of hurting the European Union by raising energy prices and weakening the already somewhat vulnerable European block.
The accusation has been denied by Russia, but the issue highlights how vulnerable Europe is to the Kremlin’s suspension of energy supplies.
This is something that all European governments have known or should have known for a long time.
Solutions have also existed for a long time. That’s pretty simple. The EU and the UK need to allow energy companies to extract natural gas domestically using hydraulic fracturing. Yes, carbon-based energy extraction has environmental implications. But it’s true that natural gas comes from Derbyshire, England, the North Sea off Scotland, or Russia.
Cold weather can mean a warmer attitude towards drilling
That view is unlikely to be home to many European leaders, but it can become more attractive as the cold approaches this fall and winter. At that point, newspaper headlines will scream at the huge surge in heating costs and the risk of pensioners at risk of freezing at home.
When that happens, or if it happens, some European countries will be more tolerant of energy companies that want to drill gas in the country. And that’s where investors are likely to benefit from investing in major European energy companies such as BP (BP), Royal Dutch Shell, Total (TOT) and Eni.
On this issue, it is worth waiting to see how the energy crisis progresses and how local governments react. Once drilling regulations begin to be relaxed, it may be time to dive into energy patches.