Putin's Energy Pivot

Of all commodities, none is as important as energy, because all other commodities depend on it. Without an abundance of cheap energy, there can be no cheap fertilizers, and no cheap food. There can be no cheap metals, no affordable cars, no factories. Modern society would grind to a halt.

This is no new insight. Geo-politics is built on it. The dollar is tied to oil for the express purpose of control. The idea being that those who control the price of oil control the price of all things. Financial markets in the West have thus grown powerful to the point that just about all the resources of the world are dependent on the dollar. However, a series of self inflicted wounds have weakened the West's grip on the world's commodity markets.

A combination of climate hysteria and Russia paranoia has allowed Putin to get control of the price of natural gas in Europe.

The result has been skyrocketing energy prices, with natural gas and electricity leading the way. This has in turn put pressure on energy dependent industries. Metal produces are cutting down on production. It makes more sense to sell energy hedges than continue production. Some factories are permanently shut down because of stubbornly low metal prices relative to the price of energy.

The financial markets that used to control the price of all commodities are still in control of metal prices. But this is of no help without a corresponding grip on energy. All that's achieved is a mispricing of metals relative to energy, with a corresponding decline in production.

Pretty soon, there will be a shortage of metals, and prices will explode higher. But it won't be the metal producers in the West that get to take advantage of this future price hike. The benefit will be reserved to those with access to cheap energy, and it will be up to Putin to pick those winners.

Putin's plan is simple. Having taken control of energy prices, he can now pivot other industries in under his control. Fertilizers are already there, and metals are following suite.

Once metals are under Russian control, manufacturing follows. Putin will be able to dictate where in the world manufacturing will take place. This privilege which used to belong to the West is now on its way to Russia, all thanks to ill conceived policies based on hysteria and paranoia.

Greta Thunberg

Eco-anxiety - By Anders Hellberg - Own work, CC BY-SA 4.0, Link