Industry Voice: How We Are Navigating Upheaval in Energy Markets

Long-term fundamentals continue to guide T. Rowe Price's investment approach.

clock • 3 min read
Industry Voice: How We Are Navigating Upheaval in Energy Markets

Key points

  • Russia’s invasion of Ukraine could lend urgency to the clean energy transition and encourage policymakers in Europe to view legacy fuels more pragmatically.
  • Oil prices are likely to be volatile as news flow related to the conflict comes out. Still, high oil prices should cure high oil prices over time.
  • Our approach to the energy transition seeks quality companies with strong core businesses that could benefit from, but do not wholly depend on, this trend.

Russia's invasion of Ukraine, followed by an escalating exchange of sanctions with the West, has ratcheted up volatility in the energy markets. We continue to monitor how this highly fluid situation is evolving. Instead of trying to predict the exact outcome of what might occur based on developments that are very hard to forecast, we are focusing on two areas:

  • Where we see likely changes based on what has already occurred and
  • Our rigorous analysis of long‑term fundamentals and deep understanding of individual companies, which continue to drive our investment approach.

Following the data and focusing on what the world might look like after a crisis can help us to avoid overreacting to short‑term volatility and aid in identifying potential longer-term opportunities.

Despite the lack of clarity surrounding the Ukraine‑Russia war and its ramifications, we believe that Russia's actions thus far likely have shifted the calculus for energy policy, with supply security concerns significantly elevated and becoming more intertwined with environmental considerations. Governments may seek to accelerate efforts to wean their economies off fossil fuels but, at the same time, may show more pragmatism around diversifying the legacy sources of baseload power, especially to the extent that eurozone member states strive to reduce their reliance on Russian natural gas. Given the uncertainty surrounding these transitions, we tend to gravitate toward high‑quality companies whose growth stories, in our estimation, could benefit from these trends but do not entirely depend upon them.

 

 

This post was funded by T. Rowe Price

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The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

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Key points

  • Russia’s invasion of Ukraine could lend urgency to the clean energy transition and encourage policymakers in Europe to view legacy fuels more pragmatically.
  • Oil prices are likely to be volatile as news flow related to the conflict comes out. Still, high oil prices should cure high oil prices over time.
  • Our approach to the energy transition seeks quality companies with strong core businesses that could benefit from, but do not wholly depend on, this trend.

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