Daily Brief: Russian Oil Could Soon Disappear, So The IEA Wants You To Use Less

Daily Brief: Russian Oil Could Soon Disappear, So The IEA Wants You To Use Less

almost 2 years ago3 mins

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The International Energy Agency (IEA) said on Friday that countries should try to reduce oil demand, so they won’t be too gobsmacked if Russian supplies vanish in the blink of an eye.

What does this mean?

The IEA estimates that up to 2.5 million barrels of Russian oil exports could cease each day starting next month, after the fallout from the country’s invasion of Ukraine. The agency’s calling it an “emergency situation” for oil markets: after all, the price of Brent crude – a key international benchmark – already hit a 14-year high earlier this month, and the IEA reckons it could rise even more as supply struggles to keep up with summer’s high demand. That’s why the agency’s now urging its members – including the US, Japan, and Germany – to promote things like cheaper public transport, working from home, and less travel, as part of a push to reduce oil demand by 2.7 million barrels a day over the next four months.

IEA oil
Source: Bloomberg

Why should I care?

The bigger picture: Too little, too late.

Europe might want to limit its gas usage too, since it currently imports nearly half of its supply from Russia. And sure, the IEA thinks Europe could cut its use by a third over the next year by doing things like using more renewables and boosting energy efficiency. But it might be too late: Goldman Sachs predicts any big disruption in Russian gas supply could hit the region’s economic growth by 2.5% this year.

For markets: Going green.

Green energy is gaining speed now that countries are moving away from Russian oil and gas. And since analysts reckon wind and solar companies – whose projects can be set up faster than some others – stand to benefit the most, they predict they’ll grow a lot over the next three years. Investors seem to agree: they plowed nearly $900 million into funds tracking clean energy companies – including some of the biggest wind and solar firms – last week.

Green gain

Keep reading our next story...

FedEx Reported Mixed Quarterly Results

FedEx image

FedEx reported mixed quarterly results late last week, but its biggest rival came out looking solid, strong, and ready for round two.

What does this mean?

There’s still a shortage of shipping containers for sea shipments, so more customers resorted to sending packages by air freight last quarter. That suited FedEx just fine: air-based shipping makes up about half of its sales, so the boost – and a bump in the prices it charges – helped it hoist its total revenue by a better-than-expected 10% last quarter from the same time the year before.

But business wasn’t quite so good on the ground: the surge in Omicron cases caused problems for FedEx’s land-based shipping business, so the company made fewer deliveries than expected overall. On top of that, FedEx was grappling with higher expenses due to the labor shortage and rising fuel costs. The company’s profit, then, grew a worse-than-expected 25% last quarter, spurring investors to send its shares down after the news.

FedEx stock
Source: Google Finance

Why should I care?

For markets: UPS is cruising.

FedEx might have more costs up ahead: just last week a chunk of its delivery contractors signed a petition asking for a pay bump. That’s something its rival UPS doesn’t need to worry about: it already pays its workers better than a lot of competing companies that have struggled to hire and keep workers. That’s kept UPS mostly sheltered from the labor shortage, which might be why its stock has outperformed FedEx’s by 17% so far this year.

The bigger picture: Amazon’s ready to fight.

There’s another kid on the delivery block: Spire Aviation released data showing that Amazon Air – Amazon’s cargo airline – flew 35% more flights last year than last, much higher growth than FedEx or UPS could manage. Plus, it has plans to expand even more this year, which could see it meet its goal to deliver more packages than UPS and FedEx in the US this year.

Airline growth
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