Energy sector is in focus because of Iran, AI and California. Here are

Greetings from Colorado, where I had the opportunity to do a nearly hour-long chat with the Chair of the Federal Trade Commission. While most of the conversation with Andrew Ferguson was about A.I. and Big Tech, we did venture a little bit into energy vis-à-vis Europe and its energy woes.

‘Woes’ is the correct term. The continent has been in a constant state of nervousness since the Nord Stream pipeline was blown up in 2022.

My take →  It’s incredible that we have satellites that can see into your car from thousands of miles high, but we still don’t know who perpetrated one of the largest acts of industrial sabotage of all time. 

The European energy story is one we’ve been reporting on at CNBC over the last 4 years. We’ve highlighted how critical U.S. LNG sales are to Germany and other nations, as well as the real risk of ‘energy poverty’ in wealthy countries like the U.K. Let’s be brutally honest: Europe is not just a victim of pipeline sabotage. The continent is being hammered by a number of odd energy policy decisions, from closing zero-emission nuclear plants or shutting down natural gas facilities.

Many rational energy actors are scratching their heads. Climate risk tends to be front and center for many of these policy moves, so it’s somewhat ironic that relatively mild weather the last few years has helped ‘save’ Europe from an even more serious energy situation.

Europe’s weather luck may have run out this year, and the war in Iran is going to make things worse. Here’s why.

It’s been a hot summer across much of Europe. Although air conditioning is not ubiquitous across the continent – at least not yet – its use is increasing. That’s raising the need to make power, which is cutting into natural gas storage levels. Europe also gets a big chunk of natural gas from shipped-in imports from the Middle East, United States and – rather ironically – Russia.   

Key Point → Europe has agreed to end all imports of Russian LNG by the fall of next year, with a phase-out starting this year. It’s not clear to me how you go from record imports to zero imports in twelve months, but that’s the plan. Europe doing Europe things.

This data from Germany’s Federal Network Agency – which tracks energy and energy storage levels – is as telling as it is a little scary. It’s the “percent of storage levels” for natural gas right now. The blue line is natural gas storage from October of last year through September of this year. The orange line is the same period one year ago, with the shaded grey area a rolling average. You don’t have to speak German to read this chart and see that the situation is not ideal.  Natural gas storage levels are lower than last year and right at the bottom end of the rolling average. If Germany has a cold winter and power demand rises to heat homes and businesses, those storage levels will draw down quickly. If that happens, Germany will have to cut…