Global Energy Crisis; Good for My Portfolio

About 18 months ago, I overloaded (30 percent) my portfolio in energy, with ETFs FENY, VDE, and IEZ, along with pipeline and delivery plays AMLP and MPLX. These are increasing in value as energy prices are on the increase and are paying decent dividends along the way. This was a contrarian play; because traditional energy was going out of favor, I felt that over the next few years, it would increase in value. I was right, and Biden's anti-oil policies have only helped me. 

Energy prices continue to surge to fresh records as renewed fears stoke panic of the worst shortage in decades. India has warned it has only four days of coal reserves left, German power plants are running out of fuel and China just unloaded an Australian coal shipment despite an import ban and icy relations. Supply is just not there as economies rebound from a pandemic-induced lull, while problems like logistical logjams and transport bottlenecks are adding to the pressure.

OPEC+ didn't come to the rescue yesterday as the group decided to continue its original plan of gradually releasing 400,000 additional barrels of oil per month. That's despite calls from world leaders, including the White House, to bring more crude on to the market and keep a lid on prices. According to the EIA, average daily crude production in the U.S. has been 6.7% lower than last year, while commercial stockpiles of crude, excluding the Strategic Petroleum Reserve, are off by 15% compared to 2020.

That's helping send oil prices to their highest levels in three years, with Brent (CO1:COM) and WTI crude (CL1:COM) touching $82 and $78 a barrel, respectively. High natural gas prices (NG1:COM) are also prompting American utilities to switch to coal this year, but their supply is constrained by miners that have cut capacity by 40% over the last six years. This past week, coal from the central Appalachia region rose $2.20 to $73.25, up 35% YTD and the highest level since May 2019.

"Investors are underappreciating the structural changes that have taken place in the North American energy landscape that could lead to these higher prices persisting for some time," wrote Lucas Pipes, an analyst with B. Riley Securities. Some are even calling the current situation the first major energy crisis of the clean power transition, with President Biden setting a goal to decarbonize the economy by 2050 (power demand is expected to increase 60% by then). "It is a cautionary message about how complex the energy transition is going to be," added Daniel Yergin, author of The New Map: Energy, Climate and the Clash of Nations.

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