Weaponising Energy: What Happens When Buyers Lose Their Leverage

The traditional energy market is made up of ‘haves’ and ‘have-nots.’

On one side of the ledger, sit the buyers… Europe and Asia.

On the other side sit the sellers… the US, Russia, and Saudi Arabia.

These three countries make up almost half of global oil and gas production.

But despite decades of conflict, embargoes, and blockades, very little has changed in this key dynamic.

The ‘have-nots’ have always found willing sellers to support their thirst for energy.

But is ‘normal’ going to continue?

A reordering of the global energy trade

Last year, the EU pledged to terminate its decades-long energy trade with Russia.

Why is that important?

Cheap Russian gas has been a major tool in powering post-World War II Europe. Fuelling European manufacturing and giving birth to some of the world’s most iconic brands, like BMW, Audi, and Bosch.

But that energy trade is rapidly unwinding.

In essence, Europe is giving up cheap pipeline gas from Russia for high-cost LNG shipments from the US.

This is Europe’s pledge to cut off Russia’s war revenue in the conflict against Ukraine.

But as I’ve pointed out previously, the only loser in this trade is Europe.

LNG requires significant additional infrastructure and processing capacity to transport and export overseas.

Pivoting to US gas means higher
energy prices for Europe.

And unlike Russia, the US is a major consumer of its own gas, which could impact its ability to serve the European market.

And as Europe gives up on Russian gas, Russia has doubled down on its trade with China.

Russia’s share of China’s gas market is expected to reach 36% once Power of Siberia-2 is operational by the end of this decade.

And that will mark a significant shift in China’s long-term energy policy, which aims to minimise reliance on a single supplier.

Russia is now clearly a dominant player in China’s energy security. And that could make the relationship more tenuous in the years to come.

However, that pales in comparison to Europe’s energy dependency.

According to Reuters, the United States will supply at least 70% of Europe’s LNG from 2026.

So, what does this equate to?

Energy buyers are leaning towards extreme dependence.

As I’ve outlined in the past, I believe we’re in the midst of a major switch in the global energy trade.

So far, this has unfolded without a major glitch.

But as more power falls into the supplier’s hands… And AWAY from the buyer… The potential for friction grows.

How that looks in the months and years ahead, no one can predict.

But the key point is this: Energy is the most critical element in our modern economy.

Energy markets have operated harmoniously for decades, albeit with some minor skirmishes.

But for the most part, it has operated with a diverse range of buyers and sellers across the market.

But that delicate dance could be unwinding.

The major oil and gas importers, chiefly China and Europe, are increasingly relying on a single source for their energy, especially for oil and gas.

And that could deliver long-term consequences.

With just one major supplier, energy-dependent regions leave themselves vulnerable to oppressive tactics, such as tariffs, the threat of an embargo, and, ultimately, punitive pricing if they fail to comply.

As an investor, that’s what
you need to consider.

How will oil and gas stocks respond to this type of weaponisation in the energy market?

Positioning AHEAD of these events isn’t just about looking for new opportunities; it’s hedging your portfolio against major risks.

For well over a decade, energy-dependent nations have been supported by abundant, inexpensive oil and gas supplies.

But today, war, geopolitics, supply chain fragmentation, tariffs and an unwinding in who sells to whom signal the end of ‘normal.’

Energy could be the defining investment for the remainder of this decade.

It presents as a global economic threat but as an opportunity to those who invest in stocks, benefiting from higher prices.

Europe and China are abandoning energy diversification in favour of single-supplier dependence, creating unprecedented vulnerabilities that could reshape global economics and geopolitics.

If you’d like to find out more, you can do so here.