Things are looking jittery once again ahead of the US Fed meeting today.
In particular, things are turning dire in energy markets. Of course, if energy prices stay high, there’s not much hope of lowering inflation any time soon, is there?
So what’s going on?
As I mentioned a couple of weeks ago, Nord Stream 1, a major European gas pipeline that brings gas from Russia to Germany, went into maintenance works at the beginning of July.
There were fears that the pipeline would not come back online once works ended…but it did.
Yet things aren’t running smoothly.
One week after restarting the pipeline — which was already running at a low 40% capacity — Gazprom says it’s running into problems and will need to cut gas flows to just 20% capacity.
The uncertainty has sent energy prices skyrocketing in Europe.
With winter just around the corner, this has driven Europe into a frenzied search for alternatives.
And as more countries continue to grapple with high energy prices and shortages, things are starting to turn for one of the most controversial sectors in the energy market: nuclear.
World gives nuclear another shot
In the last few weeks, we’ve seen a flurry of activity regarding nuclear as Europe looks to diversify from fossil fuels.
Germany, where nuclear provides about 6% of its electricity, is mulling over extending the life of its three nuclear plants instead of switching them off.
In France, where nuclear provides 70% of its electricity mix, the government is planning on building up to 14 new nuclear reactors by 2050. It’s also taking over power utility Electricity de France (EDF) to help reduce fossil fuel imports.
As Finance Minister Bruno Le Maire said, the buyout ‘will give EDF the means to implement the new nuclear power plant programme the president has asked for and the roll out of renewable energy in France.’
And speaking of EDF, last week the company got planning approval from the UK government for Sizewell C, a nuclear power plant to be built in Suffolk. Something the company has been after for 10 years.
And earlier this month, the EU classified some nuclear projects as ‘green’ energy.
What’s important is that this gives these projects ‘access to hundreds of billions of euros in cheap loans and even state subsidies’.
Of course, it’s not just Europe.
In Japan, nuclear produced about a third of its electricity before the Fukushima disaster in 2011. Today, though, nuclear’s share is down to 4%.
But the tide is starting to turn there too.
According to a recent poll by Jiji Press, 50% of people in Japan back restarting their nuclear reactors. With close to 29% opposed and 23.8% having no opinion.
Japan wants to bring back online as many as nine nuclear reactors to help with electricity shortages this winter. And it’s looking to bump nuclear’s share in the electricity mix to 20–22% by 2030 by just restarting its reactors.
But there’s also been more interest in shoring up domestic supplies.
In fact, the UK is looking to boost their domestic nuclear production, with £75 billion pledged last week to the Nuclear Fuel Fund.
In the US, while close to 20% of electricity comes from nuclear energy, the US imports much of the uranium it uses.
In short, the world is turning to nuclear to increase energy security.
There’s a clear shift happening in energy markets
One thing that’s clear is that with nuclear coming back into favour, this boosts the investment case for uranium. In fact, the price of uranium is up 46% in the last 12 months.
But the big point here is that energy security, high prices, and war are all driving the world to shift away from fossil fuels faster than anticipated.
Until next week,
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Selva Freigedo,
For Money Morning
PS: Another unloved sector at the moment is crypto.
But while the mainstream is busy kicking bitcoin while it’s down, my colleague Ryan Dinse says that the smart money is already circling some crypto projects. In fact, he’s hosting a free seminar this Thursday to tell all about it. It’s called ‘The Great Crypto Lock-Up Seminar’.
So if you are interested in things like blockchain and cryptos, make sure you don’t miss it. I’ll definitely be tuning in. To register, you can click here.
