The Importance of The Nord Stream 1 Pipeline Coming Back Online
I always love a long-shot win; this year, the Kentucky Derby was a tremendous 80-to-1 win by Rich Strike. Rich Strike entered the race 24 hours before due to a scratch. Just like the Kentucky Derby, this energy crisis is starting to look more and more like a long shot.
But who is the long shot? Russia, The EU, China, the consumers?
This energy crisis has been building up for years, and the Russian invasion of Ukraine just accelerated the inevitable realization that the demonization of the fossil fuel industry was unfounded. Putin has gained the upper hand over the last twenty years, and Europe handed him the keys to the energy crisis and did not look back.
The Nord Stream 1 pipeline has been shut down for routine maintenance and is supposed to come back online this next week. There is tremendous speculation that Russia will take this opportunity not to bring this critical gas pipeline back online.
Russia supplies 45% of the European market's natural gas. Unfortunately, the Nord Stream 2 line never came into production. Although that would different channel would have reduced Russia's leverage right now. The chart below shows the path for both the Nord Stream 1 and 2 pipelines.
Canada is repairing one of the turbines required for the Nord Stream 1 return to service. There was some question about the ability of Canada to fix the turbine. Still, it has to be resolved as Germany needs the gas from Russia for its manufacturing heavy economy. Large German companies like Volkswagen and other auto manufacturers have felt the heat of this crisis. They could face a shutdown if the natural gas supply continues to be so volatile.
The Bottom Line
Germany's economy will suffer heavily if Nord Stream 1 does not come back online in the next 30 to 45 days. It is hard to put a number on the loss of manufacturing capabilities about to happen. I am no economist, but even I can see that it will be a rough next few months.
So, are you a betting person? Do you think it will be an 80 to 1 chance the Nord Stream 1 will come back online in less than 30 days? Get some popcorn and watch the next few weeks.
I, for one, do not plan on placing any bets on this race, as Putin has been one step ahead of our allies for over twenty years.
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Please reach out to our team at any time for answers to your questions. Jay R. Young, CEO, King Operating
ForbesBooks Author of "The Upside of Investing in Oil and Gas