United Kingdom is on the verge of collapse
Canada and the United States may be close behind
United Kingdom inflation was last reported at 10.1% and Citi sees U.K. inflation rising to over 18% in early 2023. U.K. natural gas prices are now 526 pence a therm, the equivalent of about US$40 a gigajoule or on a BTU equivalent basis about US$250 a barrel of oil.
There is no relief in sight as ill-conceived climate policies have driven oil & gas investment out of the industry but U.K. leaders now seek ways to encourage more oil output from the North Sea. Too little, too late.
The only obvious beneficiary of institutional stupidity is Vermillion Energy (VET.TO) which is a major supplier of natural gas in Europe. The bonanza for Vermillion investors is massive.
Policy failures have seen U.K. per capita GDP stagnate for the past 15 years. With incomes falling behind inflation and the prospect of very high interest rates to tame inflation, the U.K. economy is in trouble and many Brits will have serious problems making ends meet.
The problems U.K. faces are a self-inflicted wound. Crippled by outrightly stupid beliefs that CO2 causes climate change, the U.K. has tried to shift from coal and natural gas to wind generated electricity, and hydro rates have almost doubled as a result since 2010.
With natural gas flows from Russia to Europe stalled by geopolitics and sanctions arising from the Ukraine war, the energy shortage is certain to worsen as winter approaches. Hamstrung by reckless government spending, the U.K government is now deeply indebted and lacks the capacity to support the population during a deep recession which I see as the likely trajectory of the U.K. economy today. U.K. national debt has risen from less than 30% of GDP in the early 1990’s to over 80% of GDP today.
With worsening inflation and a deepening energy shortage, the United Kingdom economy seems on the verge of collapse.
Think we are safe in North America? Think again.
The Biden administration’s embrace of nonsensical climate policies is like the U.K. experience on steroids. Rather than encouraging development of America’s vast fossil fuel resources, the Biden government is doubling down on “renewables” and still living in the fools’ paradise that it is possible to “transition” away from fossil fuels to wind and solar, a stupid idea even if it were possible. But it is not. CO2 is harmless. Covering the entire surface of the Earth with windmills would not generate enough electricity to replace existing fossil fuel powered generation. Solar’s legacy will be thousands of acres of land filled with toxic waste.
The inaptly named Inflation Reduction Act will not lessen inflation and is being re-branded as a “climate iniative” that Biden says will do more to fight “climate change” than anything ever done before by any country on Earth. He is certainly right that this level of stupidity has no parallels anywhere. Biden may persuade hard core “progressives” to keep voting Democrat through his climate policies, but he can’t change the laws of physics no matter what legislation he enacts and the inevitable outcome of his reckless policies is a deeper energy shortage, higher prices for oil, gas and coal, and persistent inflation chewing up American’s savings and forcing millions into poverty.
Peter Shiff saw the housing collapse of 2008-2009 before it happened and warned American leaders their policies were dangerous. His warming was chronicled in htis 2012 book “The Real Crash” which documented the policy failings leading up the Global Financial Crisis (GFC). Obama’s administration ignored that warning and the housing market collapse that ensued created the GFC just as Shiff had predicted. Federal policies since that time have done nothing but double down on policies to encourage people to buy houses they cannot afford while local development codes discouraged construction of housing at a rate needed to support household growth including immigration. History repeats itself but the cycle worsens each time the pendulum swings.
In Canada Trudeau is no better. Canadian national debt is now in the trillions and rising, inflation is stubbornly high and almost certain to rise further, and the housing market is in dissarra, a victim of a supply-demand mismatch between low housing starts and immigration policies with home unaffordability exacerbated by artifically low interest rates.
For the time being, energy investors have found the safe place to keep their money. My own gains have been spectacular. In the fabled movie “The Graduate” the watchword was “plastics”. Today, the watchword is natural gas. My favorite names are BIR.TO SDE.TO TOU.TO CNQ.TO and PEY.TO.
I've been reading your articles with interest for quite a while now. Just by chance I noticed the stock you mention on this page, VET.TO, has crashed. It was around $38 in Aug /22, but today, May /23 is around $16.
Do you think that's all due to the windfall tax or something else?
With the AECO going down, don't you think canadian gas companies will take a loss on their earnings ? Or their exposition is small so we wont see it? Thx