“It’s very clear from the seismic record that these are blasts”…
That’s Björn Lund. He’s the director of the Swedish National Seismic Network at Uppsala University.
And he was talking about the source of two major leaks detected yesterday in the Nord Stream 2 undersea pipeline. It was built to carry Russian natural gas to consumers in Germany.
Lund said seismologists picked up two powerful explosions yesterday off the coast of Denmark, where the pipeline runs.
Then came a sudden drop in pressure in the pipeline, indicating a substantial leak. Lund and his team have ruled out natural causes.
“These are not earthquakes. They are not landslides underwater,” he told reporters.
That leaves only one option – sabotage.
This is a major escalation in the energy war I’ve been writing to you about.
And it’s another reason to tune in to colleague Nomi Prins’ emergency briefing.
At 8 p.m. ET tonight, she’ll show how Americans can prepare for the worst. She’ll also reveal a new strategy she’s been working on. With it, you could make as much as 10x gains as the energy headlines worsen.
That’s just a few hours from now. So make sure you’re signed up here.
Up until now, sanctions have been the weapon of choice in the energy war…
The U.S., the European Union, and their allies banned Russian exports of oil and coal.
Russia responded by choking off flows of its natural gas into Europe.
Now, it looks like somebody has taken it a step further… and sabotaged a key piece of energy infrastructure.
Nord Stream 2 runs parallel to the Nord Stream 1 pipeline that’s been in operation since 2011 at the bottom of the Baltic Sea.
Construction on the second pipeline started in May 2018 and was completed last September, at a cost of roughly $19 billion (€20 billion).
Its owner, Russian state-owned energy giant Gazprom, paid for about half the costs. A group of European energy firms paid for the other half.
Germany hadn’t yet brought the new pipeline online. Together, Nord Stream 1 and 2 have the capacity to bring about 110 billion cubic meters of natural gas from Russia to Germany every year.
That’s enough to supply about 26 million households.
And we still don’t know who’s behind the explosions off the coast of Denmark.
One possibility is the U.S. blew up the pipeline…
You could call this the “Dark Brandon” theory of who’s to blame.
On February 7, just weeks before Russia’s invasion of Ukraine, President Biden told reporters the U.S. would stop Nord Stream 2 from becoming operational if Russia invaded Ukraine.
One reporter asked the president, “But how will you do that, exactly, since… the project is in Germany’s control?”
Biden’s responded, “I promise you. We will be able to do that.”
But it’s hard to see how the U.S. benefits from blowing up a pipeline its European allies have spent $10 billion on.
Biden relies on these countries to join its sanctions program against Russia. He also wants them to keep arming Ukraine in its fight against Russia.
Blowing up Nord Stream 2 would risk rupturing that alliance.
Or maybe Russian saboteurs are to blame…
Putin believes the Russian people can take more pain than Europeans can.
He’s hoping spiraling energy bills this winter will cause European leaders to drop their sanctions in return for Russian gas.
And he may have seen sabotaging Nord Stream 2 as a way to ratchet up the pressure.
European natural gas prices were steadily dropping in the days leading up to the suspected pipeline attack.
But yesterday, after the Nord Stream 2 pipeline news broke, they rose by 20%. And the price the British pay for natural gas spiked 33%.
But why blow up Nord Stream 2 instead of just cutting off its gas supply like Russia’s done with Nord Stream 1?
Nord Stream 2 was finished last September. But even though it contained some gas, it’s never been operational. Germany refused to certify the project as Putin was building up troops on Ukraine’s border in preparation for his invasion.
Given how his war has turned out, the chances of the Nord Stream 2 gas supply reaching Europe anytime soon are remote.
Putin may have calculated there’s little cost to Russia if it goes offline for good. Maybe he believes the increased natural gas prices in Europe – and the ripple effects this will have on global energy prices – is worth it.
And if Russia was behind the attack, it’s likely not the last time we’ll hear about mysterious undersea explosions.
The timing of the attack on Nord Stream 2 is interesting…
The day before, European politicians inaugurated a rival undersea gas pipeline between Norway and Poland.
Poland has been a steadfast supporter of Ukraine and one of Russia’s most vocal critics.
It’s been planning to wean itself off Russian gas by year end. And the new pipeline is a critical part of the plan.
Putin may have believed an attack on a Russian-owned pipeline likely wouldn’t trigger a response from NATO. An attack on a pipeline developed by a NATO member – such as Poland – would.
So he chose the least risky of the two targets.
But if he becomes more desperate, he may deem an attack on the Norway-Poland pipeline in his interest.
This all spells disaster for European energy consumers…
Folks there are facing higher utility bills and rampant inflation. And it’s left European politicians with egg on their faces.
But as Nomi has been warning, the energy war doesn’t just affect Europeans.
Global energy markets are interconnected. The energy crisis is behind the spiraling energy bills in the U.S., too.
Household electricity charges are up 16% over the last year. As a result, one in six American households is behind on its bills.
Much of this pain is due to the spike in U.S. natural gas prices…
The U.S. produces 36% of its electricity by burning natural gas. That’s up from about 28% in 2000.
And U.S. natural gas prices are up 52% from last year.
Unfortunately, this isn’t a blip. It’s part of a longer-term trend. Over to Nomi…
This rise in natural gas prices isn’t a short-term phenomenon. It’s destined to build into a crisis across the Atlantic this winter. When the weather gets colder, demand for natural gas-fueled electricity will rise as a result.
And if prices spike because of what’s happening overseas, you can bet they will spike in the U.S., too. Colder weather generally increases demand for natural gas for heating. This is true in both the residential and commercial sectors. That puts upward pressure on prices.
And if it gets unexpectedly cold this winter, those price spikes will likely intensify. That’s because supply can’t rise quickly enough to meet that extra demand.
But it’s not all doom and gloom…
These are serious problems. And the energy crisis is affecting all of us.
But as Nomi has been showing her readers, there are several types of companies that have already profited due to rising natural gas prices.
These include natural gas companies that own or supply natural gas.
It also includes companies engaged in natural gas exploration.
Nomi’s also recommended the United States 12-Month Natural Gas Fund (UNL). It tracks U.S. prices for natural gas. That makes it a simple way to get on the right side of rising prices.
And don’t forget that tonight at 8 p.m. ET, Nomi will reveal the details of an even better opportunity.
She’ll take a deeper dive into the energy crisis… and what you can do to prepare your portfolio for the worst.
She’ll even share an opportunity to make up to 10x your money as the energy markets shift.
Reserve your spot for that here.
Regards,
Chris Lowe
Editor, The Daily Cut