Today is Tuesday, the day after Friday’s, I mean Monday’s supposed dead-cat bounce and the market is striking boldly into the green. There is no appreciable positive economic data, so the only thing left is Putin, aka the Ukraine/Russia event.
- “We don’t want to split up Ukraine, we don’t need that,” the Russian president said in a speech to parliament. “Don’t believe those who scare you with Russia, who yell that Crimea will be followed by other regions.”
Okay, so is anyone really surprised by his comments? Did anyone actually believe Putin was headed to war over Crimea? Even though it is probably true the former Soviet KGB head would like to restore the former Soviet Union, or at least parts of it, does anyone believe he wants Crimea for more than anything other than its oil potential? This, then, makes his actions in Crimea economical rather than political, which is why no one should have ever thought Putin was thinking like Hitler when he marched into the Sudetenland in 1938.
- The German occupation of Czechoslovakia (1938–1945) began with the Nazi annexation of Czechoslovakia’s northern and western border regions, known collectively as the Sudetenland. Nazi leader Adolf Hitler’s pretext for this effort was the alleged privations suffered by the ethnic German population living in those regions.
Folks, this whole Crimea event is about economics, money if you will. It is estimated it will cost the Russians some several billion dollars to incorporate Crimea into the motherland, but the pay off with oil and natural gas is much, much larger over time. Keep in mind, Russia’s economy is on the fritz, perhaps headed toward recession in the next quarter or two and the Russian people are not happy.
- “The situation in the economy bears clear signs of a crisis,” Deputy Economy Minister Sergei Belyakov said in Moscow yesterday.
There is nothing like “saving” the ethnic Russians and getting some oil to boot to raise one’s political stature and to take the Russian peoples’ minds off the lousy economy.
As well, there is nothing like displaying the natural gas (NG) chokehold he has on Europe albeit the natural gas pipelines that run from Russia through Ukraine to Europe to try and loosen the red tape for exporting NG from the US. The problem is …
- Natural gas exported from the U.S. to Europe must be liquefied at export terminals, a costly process that involves cooling the gas to greatly reduce its volume.
Currently, there is one, I said one plant that can liquefy and ship NG out of the US and that is in Alaska. There is another being built in Louisiana, but that is not schedule for completion until 2015. When that plant is operational, it will ship some 80 million cubic meters per day of NG, but that pales in comparison to Russia’s 500 million-plus per day shipping of NG. True, the US has some 30 more plants approved or seeking approval and that will leap frog Russia’s 500 million cubic meters per day when the plants are operational, but that will be at least five years from now and it will cost tens of billions to complete the projects.
The point of this is: if you are looking to NG as an investment, look to the construction and supply side, rather than the sales side. Over the next few years, many of the companies involved in building and supplying these projects will be improving both revenue and bottom line profit.
Speaking of clean fuels … I know I wasn’t directly, but I am now. The fuel-cell mania seems to be ending. Another day, another day closer to tradable pricing. FCEL looks the closest to bottoming and PULG seems the farthest away. In any case, soon enough this area will be tradable again both for its near-term volatility and for its long-term growth. As an energy bet, it is more likely to make you money now and then, as opposed to NG finding its way to a hungry European market.
Trade in the day; Invest in your life …
