To punish Russia’s ruthless attack on Ukraine, on Tuesday President Joe Biden announced a US ban on imported Russian oil. As its troops continue to attack Ukraine, killing civilians and causing a mass refugee crisis, the sanctions on the country’s energy exports hope to further isolate Russia from the global economy and encourage Moscow to pull back.
In a retaliation, shortly following the Biden’s announcement, on Thursday Russian President Vladimir Putin signed a decree banning the export of certain raw materials until December 31.
With Russia being the world’s third-largest oil producer, and the main EU supplier of crude oil, natural gas, and solid fossil fuels, if its supply and demand are impacted, significant ramifications will be witnessed by the global oil market.
Following the onset of the invasion, investors have flocked to sell off their related stocks, with the S&P 500 falling into a correction for the first time in two years. The last time the S&P 500 entered a correction was February 27, 2020, when the market crashed due to fears of the outbreak of Covid.
As the geopolitical situation escalates, oil has risen to a 13-year high of $130 . Other commodity prices also are on the rise, including nickel, which hit a new record above $100,000 a metric ton on Tuesday.
The combined impact of both unprecedented rulings is that the US won’t be buying and Russia won’t be selling any of its energy exports anytime soon.
As oil, gas and, overall, energy costs continue to rise, the unpredictable geopolitical crisis has exposed the vulnerability of the fossil fuel market. As a result, investors are seeing the value ans safety in independent energy options that will safeguard them against these volatile circumstances.
As the Ukraine situation escalates, to hedge against fossil fuels, it seems that more and more investors are starting turning to solar. Over the past month, as the S&P continues to dive, solar stocks have risen on average over 20%, with some as high as 30% or 40%.
By moving towards energy independence, countries won’t have to rely on exports from another. Energy independence creates a better economy, more jobs, and, obviously by its nature is more reliable. But to achieve it, it cannot be via fossil fuels like oil and natural gas, where countries like Russia and Saudi Arabia hold monopolies of resources. Instead, the answer lies in renewable energy.
Not every country has access to oil mines and natural gas, but the wind and sun that is needed to power renewable energy like solar knows no geographical bounds. And while solar energy is inherently more sustainable for the environment, the same goes for the cost of its operations.
The more solar energy that is implemented across the world, the lower the solar costs will be. From 2010 to 2019, solar prices declined 36% as installations doubled. Coal, on the other hand, had its costs stay at the same rate as nuclear costs increased.
The devastating impact of the Ukraine war has led to an energy crisis that was disaster waiting to happen. As more investors are exposed to the volatility of relying on fossil fuel energy exports, and solar stocks continue to rise, the case for investing in renewable energy is stronger now than ever.
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