Energized Conflicts | The Daily Peel | 2/14/22

Energized Oil — To quote the great American poet Flo Rida, “It’s goin’ down for real.” The nuclear-powered stare down between U.S. President Joe Biden and President / Owner of Russia Vladimir Putin intensified on Friday with American national security officials warning that an invasion of Ukraine by the Red Army seems imminent. Oh, and happy Monday.

Now, this isn’t great for a lot of reasons. We’re not geopolitical analysts here at The Daily Peel, so we can’t speculate on what may or may not turn into World War Three. We’re here to make money, apes, and one thing this conflict has been great for is oil prices.

On Friday, global oil and gas prices spiked even more than they’d already spiked over the past few months. U.S. crude, aka West Texas Intermediate, sits at $93.90 while the U.K.’s crude benchmark, known as Brent, closed at $95.10. Both benchmarks have gained >53% in the past year and sit at +7-year highs, making the S&P’s returns look like that of the average Robinhood trader who just discovered Dogecoin.

Meanwhile, gasoline prices have gained even more in the past year, shooting up 66%, which is almost as much as my stress levels when I see the price per gallon at the Mobil down the street. But it takes more than just a potential skirmish at a 199-mile eastern European border to drive gains like that. We can’t forget about the IEA and OPEC.

Amid the egomaniacal brouhaha boiling between Russia, Ukraine, the U.S., and the E.U., the International Energy Agency threw yet another wrench into the calculus of oil prices. “Incredibly tight” is how one IEA official described conditions in the global market.

Basically, even without the Russia-Ukraine conflict, oil supplies were already precipitously low, largely thanks to an estimated one billion barrel shortfall between what OPEC was supposed to produce and what the cartel actually produced since the start of 2021.

Of course, many countries hold sizable stockpiles of oil that could ease prices if released en masse. However, we’ve just been using way more of that black gold than anticipated.

At the end of the day, anything can happen. WTI did go negative back in 2020, so really nothing should surprise us at this point.

The Week Ahead — We’ve got another fun week of degeneracy ahead of us, apes. Let’s take a look at what we can expect.

Monday: While you’re busy eating heart-shaped candy from your mom and watching your friends post cringe-a** love quotes on Instagram, the treasury will be auctioning off both 3- and 6-month bills, and we’ll get a reading on consumer inflation expectations.

Tuesday: After recovering from your Valentine’s day hangover, Tuesday brings a lot of fun as well. Macro nerds will flock to read the latest PPI and Empire State Manufacturing Index. Meanwhile, firms including Roblox, Airbnb, and Wynn Resorts report their latest earnings.

Wednesday: On Wednesday, details about import and export prices over the last year will drop along with the latest retail sales data. Earnings will be the real fun. Nvidia, Shopify, and Cisco will update us on their latest quarter, and given the state of the semi-market, it’s gonna be exciting.

Thursday: Housing data will take over the minds of economists on Thursday, along with the Philly Fed Manufacturing Index. On the earnings side, Walmart, Palantir, Roku, and Dropbox will steal the limelight.

Friday: Friday’s gonna be boring from the data side for economists, but maybe speeches from the Fed’s Lael Brainard and governors Wallard and William will cheer them up. Meanwhile, DraftKings and John Deere will dazzle us with their latest numbers.

As I said, it’s gonna be fun. We'll see you there!

New Nukes — What if I told you a potential remedy to a nuclear-powered conflict driving insanity in the energy market…could be more nukes? Okay, you’re right, it probably isn’t, but we’re not talking about regular old nukes here.

For these nukes, we took a lesson from the Sun and all the other stars out there and switched from boring old fission reactions to the way more based and cool fusion reactions.

Time to put on our science hats. Nuclear fission, the process currently used to power reactors around the world, is your grandpa’s nuclear reaction. This is a process of splitting heavy atoms into lighter ones that then (somehow) produce energy.

Fusion, on the other hand, is your non-existent grandkid’s nuclear reaction. Still not achieved at scale, fusion involves combining light atoms to produce the heavier helium, which in turn (somehow) produces energy.

So, who cares? Well, everyone, or at least, everyone should. Nuclear fusion is the holy grail of sustainable energy, and just last week, we witnessed a remarkable breakthrough in this technology.

Fusion > fission. Why? Well, fission is, in a word, dangerous. The process induces a chain reaction that can lead to things like Chernobyl and Three Mile Island when not properly monitored.

Fusion, on the other hand, uses an inherently safe reaction in a tokamak system that does not present the same threats as fission while also producing much less waste with much less radioactivity.

Now, for the breakthrough. Scientists at the U.K.-based JET Labs just smashed their own record, set way back in 1997, for how much energy can be produced from a fusion reaction.

The experiment produced 59 megajoules of energy over the course of 5 whole seconds, equivalent to 11 megawatts of power. That’s more than 2x the previous record and is a groundbreaking step towards a clean, safe, and sustainable fusion energy future.

This is huge. While fusion, like quantum and other deep sciences, is one of those things that’s always “10 years away,” some scientists actually think this time is different. Moreover, the amount of energy that can be produced through this technology at scale is so powerful that the 22nd century could see effectively free energy.

It sounds crazy, but as we said earlier, oil did go negative, so who knows what could happen.