By Andrey Dashkov, analyst, Casey Research
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The U.S. has just announced a ban on Russian oil. By the end of 2022, the U.K. will stop buying it as well.
The European Union is about to cut its import of Russian natural gas by two-thirds.
Even China is placing restrictions on Russian oil purchases. At least two of its banks have restricted funding for purchases of Russian commodities – including oil – as Reuters reports.
In other words, some of the world’s biggest players are turning away from one of the world’s biggest oil suppliers.
We aren’t going to talk about the situation in Ukraine here. Although, of course, it’s the most obvious cause for this.
Instead, let’s focus on the bigger picture.
And the bigger picture is that the world is moving away from fossil fuels, faster than ever.
The war in Ukraine has accelerated the “green transition” – a trend that I’ve been talking about for nearly two years now.
In a moment, I’ll tell you how to look at the current situation in the oil and gas market… and how to play the long-term green megatrend.
Medium-Term: Oil and Coal Soaring
In the wake of the war in Ukraine, crude oil has blasted past $120 per barrel. As of writing, its price is 66% higher than at the beginning of the year.
I predicted this on February 26, the third day of the war in Ukraine. I said:
And [oil] could get even higher as the war in Ukraine continues and new Western sanctions hit the Russian economy.
Since that article went live, the price of oil has been up 30%.
Is there more upside to the price of oil?
Yes.
As the world seeks alternatives to Russian oil and the war in Ukraine continues, I will not be surprised to see oil touch $150 in the coming weeks.
This is the cost of the transformation that Western economies on both sides of the Atlantic will endure. They will change their energy supply chains and rely on other countries (not Russia) for their energy needs.
So, prepare for expensive gas in the coming months. And I hope you have an opportunity to position yourself to profit from the most recent developments.
The Green Transition Is Accelerating
This is the “bigger picture” I mentioned.
The truth is, quite a few oil-rich nations aren’t aligned with the West.
So the best way forward – and most Western governments understand it – is locally produced clean energy.
From nuclear to wind and solar, it’s much safer and more reliable than oil and gas.
A nuclear station serving a city will be there regardless of what happens overseas, and the cost of its energy will not rely on the global oil market, which includes government organizations like OPEC.
Here at Casey Research, we see the writing on the wall. Clean energy is coming, and billions – if not trillions of dollars in investment funds – are going into clean projects.
Germany, for example, is going to reach its 100% renewable energy goal more than a decade earlier than it initially planned. A 200-billion-euro investment, committed just recently, is going to do that.
Germany isn’t going to be the only country to rethink its long-term green goals. I’m certain we will hear about similar “boost” measures from other countries in the coming months.
How to Play It
As an investor, you want to play both trends. The short-term oil spike and the long-term green megatrend.
You could consider an oil exchange-traded fund (ETF) like United States Oil Fund LP (USO). It tracks the price of light sweet crude oil and gives the most direct exposure to this commodity.
From a long-term perspective, it makes sense to look at an ETF like iShares Global Clean Energy ETF (ICLN). It tracks an index following a portfolio of companies that produce energy from wind, solar, and other renewable sources.
These ideas might seem contradictory, but they follow two trends happening at the same time. And they could give you an opportunity to profit from both.
Good investing,
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Andrey Dashkov
Analyst, Casey Research
P.S. Ultimately, the Russia-Ukraine conflict and global supply crunch mean one thing: the price of products you rely on every day will keep going up. Food… oil… coffee… you name it.
And some things might disappear altogether.
We recommend taking several steps to get ahead of these shortages and price hikes.
My colleague Dave Forest recently put together a presentation to show you how to protect your wealth… your family… and how to stay ahead of everyone during this time.