In focus: Alternatives to Russian energy as oil prices hit 14-year high
Oil prices have surged. Oil prices surged as sanctions on Russian companies bite, and US and European allies explore banning imports of Russian oil. Two groups of companies are beneficiaries of higher oil prices and potential widening of Russian sanctions: US oil and gas companies and alternative energy companies, both of which serve as alternatives to Russian energy.
Western economies will seek to increase energy security and independence through continued investment into oil and gas and renewable energy. In the US, Republicans want to respond with more US drilling, while Democrats says the cutoff favors a faster switch to clean energy, such as wind, solar and other means.
Europe: The International Agency has put up a 10-point plan to help end Europe’s reliance (https://www.iea.org/reports/a-10-point-plan-to-reduce-the-europeanunions-reliance-on-russian-natural-gas), including replacing Russian gas with alternative sources and accelerating the rollout of new wind and solar projects.
Stock Implications: Large US oil & gas companies have indicated they will remain cautious on investing into new capacity and stick to their production plans even if oil prices were to rise substantially. US oil & gas stocks (COP, PXD, EOG, OXY, FANG, XOP ETF) with high upstream exposures will benefit from improved cash flows if elevated oil prices are sustained. Accelerated investments into renewables will also benefit companies (VWS DC, Goldwind 2208 HK, 968 HK, TAN ETF) involved in the development of new wind and solar projects. In the face of continued geopolitical uncertain