Shah Nitesh WisdomTree ETF

WisdomTree ETF : The energy crisis

WisdomTree ETF: Tight natural gas supplies in Europe have driven up the price of energy source

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Nitesh Shah, Research, Europe, WisdomTree

  • Turning to US/Australian/Qatar exports of liquified natural gas (LNG) is also difficult, due to supply disruptions and strong demand from Asia
  • Energy Utilities are feeling the pressure. Many have long-term fix pricing contracts with customers, but don’t have sufficient hedges (and the price of financial market hedges are rising)
  • We are witnessing another case-study in supply-side shocks driving inflation. There is nothing central banks can do to alleviate the problem. In fact, raising interest rates or tapering quantitative easing programmes will simply increase the economic hardship for households and companies.
  • Many fear a tight supply in Summer could be followed by an energy crisis in Winter if we have a very cold season.
  • Reliance on natural gas as a transition fuel – a lower carbon option than coal or oil – has increased in recent years. When less reliable wind and solar energy production fall short, natural gas dependency increases.
  • Predicting long-range weather and wind forecasts is difficult. So it is too early to say we will have a problem in winter. But what we do know is stocks of natural gas in US and Europe are low and so the buffer is very thin.
  • Energy utilities that use other feedstock for electricity production – coal and oil – during this period of tightness also face higher costs as they need to pay for sufficient Emission Allowances. This could resurface some of the political conflict between meeting climate goals and social obligations of governments.


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