Get Ready For Some Long Term Pain And Disruptions As We Wean Ourselves From Russian Oil And Gas

      Forbes magazine projects gasoline prices of $8.00 US per gallon here in California. There are horror stories like this playing out all over the world. There are riots over energy prices in Nigeria, for example.

      High energy prices create political instability. In any country, those in power are blamed for the high energy prices. There is the feeling that if those in power are voted out, the problem will be solved. I will leave you to reflect on that.

     I just sat in on an excellent podcast by Gideon Rachman of the Financial Times of London. He was interviewing an international energy expert. This expert made a surprising finding. The United States is now the largest producer of crude oil and natural gas in the world (as a result of shale oil.)

     Those of you here in the US who are getting hit by high gas prices have one question in your mind:

"If we have all this oil and natural gas, why are we paying such high gasoline, diesel, and natural gas prices?"

       This question crosses my mind often. I find the answer most unfair. We in the US are forced to pay the world market price for energy.

    The energy expert gave the good news that Europe should be weaned from Russian oil and natural gas within 2 years. Putin currently earns some $300 billion US each year from worldwide sales of oil and natural gas. When he loses Europe as a major customer, he will not be able to make up the loss by sales to China and India. China is making very tough deals for low-priced oil and gas from Russia. India is starting to buy oil and natural gas from the US.

    There is also the issue of the $8.4 billion Nordstream 2 pipeline built to transport natural gas from Russia to Europe. Russia's Gazprom invested $4.2 billion in this pipeline. Likewise, a consortium led by Shell Oil Company invested $4.2 billion US in this pipeline. This massive sum of money will now have to be written off. The companies sustaining these huge losses will be asking for government reimbursement.

      This energy transition is going to be very expensive and painful for all of us. Putin believes that we in the West are not strong enough to take the pain. We will give in and start buying oil and natural gas from him again. A few small countries will give in. It will be of little help to Putin or the rest of us.