Sabotage?

On 26 September at 2:03am, Swedish seismologists registered unusual activity near the Nord Stream pipelines. At 7:04am, they noticed a second spike at their measuring stations.

If you’ve been following these pages, you’ll remember that Nord Stream 1 and Nord Stream 2 are underwater pipelines built to deliver natural gas from Russia to Germany.

It wasn’t an earthquake or a tsunami that hit the area.

Instead, according to the Swedish National Seismic Network, the readings registered by their seismographs came from ‘two clear explosions’.

As a Danish Air Force fighter plane confirmed, later on, gas was leaking out of the Nord Stream pipelines:

While neither pipeline had been in operation at the time of the explosion — Nord Stream 2 had never been brought online, and Nord Stream 1 had been shut off ‘indefinitely’ for repairs — they still had gas under pressure inside.

The area was cordoned off, and investigations are ongoing.

Over the following days, we found out there were a total of four leaks, two in each pipeline.

And, according to Denmark and Sweden’s United Nations mission, the magnitude of the explosions was probably consistent ‘to an explosive load of several hundred kilos.’

It all sounds like the stuff of a great spy novel…but it’s also an escalation of the conflict between Russia and Europe.

The big question: whodunit?

Many are looking over towards Russia.

Others are whispering it’s Ukraine, who’s been pushing for Europe to stop buying Russian fuel.

On the other side, Russia is saying the US has plenty to gain. Since Europe has been looking to move away from Russian gas, they’ve become more dependent on US liquid natural gas (LNG) exports.

In fact, over the first six months of 2022, the US has knocked off Australia from the first spot as the world’s largest LNG exporter.

Everyone is screaming sabotage.

Who’s to blame? No idea.

But what’s interesting is that while European gas prices did spike after the news, prices have kept trending down, as you can see below:

I mean, don’t get me wrong, gas prices are still high. They are double what they were before the war in Ukraine started.

But European gas prices have been reversing since the beginning of September. So while the press has been painting an apocalyptic picture for Europe, things may not be as bad as they say.

For one, Europe has been filling up its gas storage, which is 90% full, well ahead of schedule.

And Europe has been diversifying their energy sources. In fact, soon after the explosions on Nord Stream, Europe inaugurated a new gas pipeline. The Baltic Pipe will carry gas from Norway to Poland.

Of course, over the long term, Europe is also looking to accelerate renewable energy, which they’ll need plenty of critical materials for.

So while things are still looking pretty tight in energy markets, changes are afoot.

And speaking of reversal…

RBA makes a U-Turn?

Yesterday, the Reserve Bank of Australia surprised markets by hiking rates by 0.25 basis points.

When I say surprise, I mean in a good way. Markets had expected a 0.50 increase. The ASX jumped around 80 points on the news, and a euphoric market ended the day close to 4% up.

The move is starting to give some hope that central banks will be reversing the tightening cycle soon.

Central banks around the world have been hiking rates in unison to combat inflation…and it’s been wreaking havoc in markets, but also on currencies.

The US dollar has been appreciating against the pound, the euro, the yen, the Chinese yuan, and the Australian dollar…

A stronger US dollar should lower inflation in the US. It makes their imports less expensive.

But commodities like oil and gas are also priced in US dollars, which makes things more expensive for other countries.

We’ll see what happens, but the hope out there now is that central banks could start to slow.

I mean, with government debt so high, I don’t see how much longer they can keep raising rates. High interest rates add to government costs.

But my colleague — and crypto expert — Ryan Dinse also thinks we could see a central bank pivot as soon as 2023. In fact, he is already preparing for the next crypto bull market.

And he is making a bold claim: that Bitcoin [BTC] could be worth US$1 million by 2030.

In a special presentation he is holding today, he’ll tell you all about it. You can watch it here.

All the best,

Selva Freigedo,
For Money Morning

Selva is also the Editor of New Energy Investor, a newsletter that looks for opportunities in the energy transition. For information on how to subscribe, click here.