Fossil fuels are back in vogue as supply struggles drive up prices

The Chinese energy crisis has seen 44% of the country’s industrial activity affected by outages. With coal, petrol, and gasoline prices on the rise, fossil fuels have clearly been written off too early. Meanwhile, Go-Ahead Group have been hit hard off the back of the decision to nationalise Southeastern Railways. 

• European markets hit hard in early trade.

• Chinese outages highlight global surge in fossil fuel energy sources.

• Southeastern network stripped from Go-Ahead Group.  

European markets are losing ground in early trade today, as the gains built over the course of the past week look at risk of evaporating once again. Chinese markets appear to be immune to the pessimists this week, despite much of the economic concern centering around the Asian giant. While the UK continues to struggle with empty petrol pumps, China has a whole host of issues that has resulted in huge power outages and widespread economic disruption. Power cuts across 20 of the Chinese states have caused a raft of downward revisions to economic growth, with Goldman Sachs joining in to predict 2021 growth of 7.9% rather than 8.2%. While each country appears to be struggling with their own mix of issues, the ongoing squeeze on energy supply has helped drive fuels sharply higher across the board. While many investors have spent their time diversifying towards green energy and away from fossil fuels, we are instead seeing that lack of production and persistent demand drive up the likes of crude, coal, and gasoline in recent weeks.  

It has been a volatile time for domestic travel stocks of late, with Go-Ahead Group providing the latest focus after the recent takeover speculation between Stagecoach and National Express. The TfL decision to take over the running of the Southeastern Railway strips a significant chunk of revenue from Go-Ahead Group, highlighting a pro-active stance towards nationalisation from a Conservative party than many would have expected. With the Conservatives having raised taxes to fund the NHS and now nationalised part of the rail network, the Labour party will have to start looking for new policies to distinguish themselves from this new approach.  

Ahead of the open we expect the Dow Jones to open 88 points lower, at 34,781.