Russia Annihilated its Economic Future - InvestingChannel

Russia Annihilated its Economic Future

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Mean Joe Green

If Russia’s goal was to push the world further towards green energy then they did an excellent job.

Europe cannot sustain itself with internal fossil fuel production simply due to a lack of reserves in the ground.

That forces them into one of two situations: rely on imports or change the source of energy.

To be fair, Europeans have called for and led the way in renewable energy investments.

But with crude oil soaring past $100 per barrel, that changes the dynamic.

Once energy prices get too costly, it makes more sense to pay for green technologies that otherwise would have been too expensive.

The biggest hangup for the last decade has been storage capacity.

Europe could likely produce enough energy to meet its needs. But they can’t store it to even out the daily fluctuations in demand.

In the next decade, battery technology holds the key to this future.

Some companies like Tesla (TSLA) continue to improve on existing lithium-ion liquid state batteries.

Others like Quantumscape (QS) are focused on developing solid-state batteries, which haven’t been produced at a commercial scale yet.

The longer oil stays at elevated prices, the more likely these companies and others are to receive investments and real demand for their products.

And once you start the ball rolling, it’s very hard to stop.


Russia Annihilated its Economic Future

Key Takeaways

  • Inflation spiraled out of control as Russia’s Ruble tumbled and Russian citizens rushed banks to take out U.S. dollars.
  • Sanctions have already devastated Russia’s economy, chopping as much as 10% off GDP forecasts.
  • Higher prices along with politics will drive Europe and the U.S. to become more energy independent.

Sanctions against Russia hit extremes not seen since WWII.

The world hasn’t cut off Russian exports…yet. But Russia may have just put its economic future in jeopardy.

Russian Inflation Explodes

Citizens of Russia rushed to banks, hoping to withdraw U.S. dollars. They quickly learned none would be forthcoming.

And Rubles…well, they aren’t worth much these days.

Before the invasion, Russia struggled to tame runaway inflation.

The Russian central bank raised interest rates from 9.5% to 20% in an attempt to stem the Ruble’s slide, the bank’s second rate hike since February.

Still ordinary Russians are feeling the pinch as some now face utility bills double the price they were a month ago.

Despite Russia’s steps since 2014 to insulate its financial system from sanctions, the overwhelming sanctions have knocked off as much as 10% from GDP forecasts.

China isn’t 100%

Despite the close ties between Russia and China, the Kremlin’s southern neighbor isn’t backing them up overtly.

So far, China has refused to criticize or endorse Russia.

When cut off from SWIFT, China stepped up to offer their own system in its place.

China is in a delicate position. While it’s flexed its economic muscle, Western countries are already angry with the communist regime.

A closer alignment between Russia and China may be natural. But it could also push Western nations to move away from Chinese supply chains at a faster pace.

Already, manufacturers have begun looking to bring more capacity closer to home in an effort to avoid supply chain backlogs.

The Bottom Line: The longer this war drags on, the more likely we are to see Europe invest to reduce its reliance on Russian energy exports.

That bodes well for some of the battery storage technologies we noted earlier as well as other companies on the forefront of clean energy including General Motors (GM), which has a heavy European presence, Siemens Gamesa Renewable Energy, Orsted, and others.

At the same time, that will keep oil prices high and subsequently gasoline.

So you might want to rack up on those rewards points before your next fill-up.

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