Dividends and Natural gas prices in Europe below preinvasion levels

About a year ago, Russia invaded Ukraine and the western countries were alarmed and have helped Ukraine by giving them weapons to fight back against Russia. The war still goes on, although no one really knows what Putin’s end game is, because if he thought he was going to get an easy victory it is not the case. After Russia invaded, the west imposed sanctions on Russia, but the toughest aspect was natural resources. Russia receives the majority of its budget from selling oil and gas and Europe was one of its biggest customers. Russian gas imports made up to 40% of Europe’s consumption. What to do when the war still goes on? In every industry there are alternatives, some are expensive, some have to be built, but there are alternatives if the government and industry have the determination.

In an article by Stanley Reed of the New York Times News Service, European natural gas prices have fallen below the level before Russia invaded. It was a market reality last summer gas prices soared as the pipeline from Russia was shut down for maintenance and an explosion damage.

The alternative Europe came up with was LNG or Liquefied Natural Gas from the US, Qatar and other sources. Europe rapidly built terminals to receive the gas sweeping away many bureaucratic obstacles and environmental objections. The plants include in Wilhemshaven in northwest Germany and Eemshaven in The Netherlands. The LNG plants allow alternative to Russian gas to arrive in Europe as well as demand for natural gas has fallen by 20%.

The good news for Europe is alternatives in place and the dependence on Russia has been broken. The not so good news is for the steel making and glass making companies, prices are still a little too high. For consumers, the prices will fall as the winter goes on, but all utilities have to ensure they have supply months in advance, so no price drop immediately.

Linking to dividend paying stocks, there are always alternatives, but there is reason why people tend not to use the alternatives – quality, price and list goes on. If something happens to the supply chain, governments and industry can find alternatives but it usually means the government must act through the incentive structure or give tax breaks or grants to industry to do the alternative. These measures work best because governments work with limited timelines in place for industry it is every quarter. What alternatives is your company looking at?

There are more questions than answers, till the next time – to raising questions.


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