Almost 15 years ago in the summer of 2007 I found myself aboard the MS Deutschland, along with my colleague Roger Conrad, for a cruise on the Baltic Sea. We were both speakers at a floating investment conference put on by our publisher at the time.
We set sail from Hamburg in Germany and visited, among many other places, Russia.
Over this nearly two week cruise I presented a ton of data and research concerning Germany’s plan to shut down all of its nuclear power facilities, retire coal plans and pursue wind, offshore wind, solar and other alternative energy sources to replace its energy needs.
My basic conclusion: This “plan” was dangerous because the inherent intermittent output produced by alternative energy sources would need to be supported by some form of power generation that could feed power to the grid when the wind wasn’t blowing and the sun wasn’t shining.
The most likely candidate: Natural gas.
That’s because coal — especially Germany’s low quality domestic “brown” coal — didn’t fit well with the nation’s desire to reduce carbon dioxide emissions. And while nuclear power is really the only efficient source of baseload carbon-free electricity supply, the country has adopted an increasingly puzzling anti-nuclear stance since the late 90s that’s only grown more strident since the Fukushima disaster in Japan back in 2011.
Of course, the only real potential source of gas supply was Russia because back then the US was pre-shale boom and still a net importer of gas.
I remember well pointing to a massive offshore wind farm as we left Germany and talking about the fact that all those wind farms just spelled increased demand for gas as “shadow capacity” to offset the inevitable peaks and lulls from wind facilities.
I felt at the time that ultimately the prospect of increasing reliance on gas imports from Russia would dissuade Germany from taking this policy to an extreme.
Unfortunately, it did not.
Today, natural gas prices at the Title Transfer Facility (TTF) trading hub in the Netherlands skyrocketed as much as 63.77%, while German electric power contracts for the month of March soared more than 43% in a single trading day.
Of course, the proximate cause of today’s price spikes is Russia’s decision to invade Ukraine in an apparent attempt to depose the current government and install new leaders more friendly to Moscow.
However, leaving aside today’s headlines for a moment, the hard truth is that European energy prices have been spiking for months now and way back on November 8th, before there was any talk of a Russian invasion of Ukraine, I posted a video presentation on YouTube entitled The Unfolding Energy Crisis warning of exactly this problem.
Here is that presentation in full. Let me apologize in advance because this presentation was originally part of a promotion for my energy investment service, Energy & Income Advisor; however, the information and data presented remains completely valid and even more relevant today than it was in November.
Among other things, I warned about the EU’s dependence on Russian gas imports and the need for countries like Germany and France to “go begging to Moscow” this winter.
In effect, it was more or less an updated version of the original presentation I made back in 2007 because, after all, Europe’s descent into this energy nightmare has been a tragic-yet-predictable slow-motion train wreck.
And that brings me to the most important point of all:
The energy crisis in Europe right now has more to do with the EU’s unrealistic and irresponsible green energy push than it does with Russia’s territorial influence in eastern Europe.
Let me be more direct:
Vladimir Putin is using natural gas as a weapon against Europe right now, but European leaders literally handed him that power, and have systematically betrayed their own people, over the past 15 years.
I know that seems harsh because it is.
Trust me, I lived in Europe for 5 years as a young man, have many close friends across the UK and EU, and I have deep respect for the culture and history, so NOTHING about this gives me any scrap of pleasure.
But, the truth is the truth and lies are lies:
Europe’s push to expand wind and solar power capacity while closing down coal and nuclear plants has failed on all counts:
Emissions of carbon dioxide are rising, electricity prices are spiking to levels that threaten recession, and Europe is now totally dependent on an increasingly belligerent Russia to keep the lights on.
If there’s anything positive to come from all this, it’s that perhaps Europe’s energy nightmare could be enough to highlight the dangerous and precarious global energy crunch that’s now underway.
In short, solar and wind power simply can NOT replace fossil fuels over the next few years, nor can electric vehicles replace internal combustion energy.
Pumping up valuations for alternative energy stocks via government-led financial manipulation, as I explain in the video presentation above, doesn’t alter the underlying economics or the laws of science (i.e. many parts of Europe are less-than-ideal for producing solar energy).
The alternative energy and EV bubble will need to deflate, and the resulting misallocation of capital corrected.
In short, the massive decline in investment in oil and natural gas exploration and development since 2014 will need to be reversed over the next few years if the world hopes to avoid Europe’s fate and a prolonged period of triple-digit oil prices.
DISCLAIMER: This article is not investment advice and represents the opinions of its author, Elliott Gue. The Free Market Speculator is NOT a securities broker/dealer or an investment advisor. You are responsible for your own investment decisions. All information contained in our newsletters and posts should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence and consider obtaining professional advice before making any investment decision.