The conflict between Russia and Ukraine is strengthening the case for renewable energy with each passing day.
Last month, just before the invasion began, I mentioned that the elephant in the room was Russian natural gas.
Sure, the United States and Europe worry that any military conflict with Russia (or any global superpower) could end in nuclear Armageddon. Those fears have existed since the early days of the Cold War.
But the bigger and more tangible threat is that Russia pulls its natural gas and crude oil exports from the market, causing prices to skyrocket.
We’ve already seen what even the threat of this happening does to oil prices. Brent Crude Oil futures spiked to more than $116 per barrel on Thursday. Prices have increased around 17% since Russia crossed Ukraine’s border a little over a week ago!
Price spikes like that are precisely why renewable energy is the future.
Oil Embargoes Sparked the Renewable Energy Revolution in the '70s
Though it was a little before my time, the OPEC oil embargoes of the 1970s were a fine example of what can happen when we depend on a vital commodity from tenuous allies. The massive spike in energy costs contributed to stagflation that defined the era.
Of course, there were some benefits of the oil embargo…
The Corporate Average Fuel Economy (CAFE) standards were introduced, for one. Today, the average car gets 25.4 miles to the gallon, which is close to double the fuel economy of 1975. And that’s with Americans buying up less-efficient trucks and SUVs.
The benefits went far beyond more efficient gasoline engines, of course.
It also laid the foundations for the renewable energy revolution.
- It led to the adoption of front-wheel drive, turbochargers and a host of other practical innovations.
- Brazil started converting its massive sugar crop into ethanol-based fuel for cars.
- And it naturally led to an explosion of investment in wind and solar technology, which is still accelerating today.
2 Arguments for Renewable Energy
Today, climate change leads the charge in the green energy debate.
Post-Russian invasion, I expect that to change.
Russia’s moves reawakened fears that have been buried for decades. And the real threat that a hostile regime could cripple our economy by turning off the energy tap is, for a lot of people, a much more immediate concern than the longer-term issue of climate change.
For context, only 3% of U.S. crude oil imports in 2021 were from Russia, according to the American Fuel and Petrochemical Manufacturers trade association. For comparison, 61% of imported oil came from Canada, 10% from Mexico and 6% from Saudi Arabia.
So Russia cutting America out of its oil stream shouldn’t affect the U.S. directly all that much. But that action would put undue pressure on the oil industry overall.
And this works for the “other guys” too.
The U.S. has emerged as one of the world’s biggest energy producers and exporters. And while that might make us proud as Americans, not everyone likes being at Uncle Sam’s mercy.
So just as the U.S., and more so Europe, have an incentive to reduce their dependence on Russian energy, less-friendly regimes feel the same way about dependence on us.
It’s Not Just Politics
Oil and gas will be with us forever. I think there’s a lot of opportunity in traditional energy, and I’ve been recommending investments in the space for the better part of two years now.
But the real opportunity — the big, once-in-a-lifetime opportunity — is clearly in renewable energy.
I believe that political pressure will massively accelerate green energy adoption. But even if Russian tanks had never crossed into Ukraine, renewable energy would have continued to gain market share on oil and gas.
Politics matter … but basic economics matter a lot more. And today, falling production costs make renewable energy the cheapest option in many cases.
On top of that, remember the wave of innovation that occurred during the oil embargoes of the 1970s? The same thing is happening now in the renewable energy space.
Of course you know about electric vehicles (EVs), wind and solar.
But one tiny Silicon Valley company is using its artificial intelligence (AI) software — that I call the “Infinite Energy” platform — to unleash the largest untapped energy source in the world.
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And this company’s innovations are set to disrupt the $7.6 trillion global energy industry.
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To good profits,
Chief Investment Strategist