romaine: from bloomberg's world headquarters in new york, i am romaine bostick. sonali: caroline hyde is off today. romaine: a lot of major volatility across markets. equity seeking yields, driving investors. they are worried about a lot of factors including global energy crisis. european energy markets, natural gas, carbon permits, record highs. the rally, fueled by a supply shortage just as the winter season starts. stockpiles from everything from

gas to coal dwindling and there are few signs that the situation will improve anytime soon. we will take a look at how ua shale is in no position to bail your about. americans now, we are staring down our own supply chains. taylor: you want to talk about a supply squeeze. our chart nails it every time. you are up 100% on power and carbon. 250% gains when it comes to that gas. this is all throughout 2021. it is unbelievable to think about the width of demand, the shift in supplies. let's do this all with nicole, bloomberg nes, nat gas, and leg analyst. when you look at that chart, what changed.

what is the catalyst for this -- your microphone died. in the meantime, pull up that chart because that is something we can talk about a little bit more, as we talk about the big price increases. it really has been all about nat gas. romaine: it has been all about natural gas. not all of the inventory drop, logistics, the idea that you have a shortage of drivers in the u.k. and elsewhere. really, the ripple effects. you talk about factories that have to shut down because they can't really afford or don't see the viability to pay those power prices. taylor: you saw that in china where they were having to shift to burn cleaner fuel. as a response, saying we have to

shut down because we can't afford those energy prices. sonali: the regulators and politicians did not have enough on their mind, certainly causing tensions on the companies involved as well as the government romaine: -- as the government. romaine: we talk about how that connects with gas prices. let's start off with where taylor had left off and just sort of give us an explanation. >> i think what really happened is demand returned to pre-pandemic levels, sort of in the middle of the summer when you saw increase in vaccinations, people started going out more. then they really -- concerns around this winter really started to come about, where a lot of people, especially traders, were concerned we don't have enough gas supply to make it through the winter. if people don't have enough gas to heat their homes, power,

electricity, you see blackouts, you see industrial plants shutting down. once the concerns came to the fore, you saw prices skyrocket. taylor: romaine walked through what is happening in europe, the ripple effect. but how is the price impacting the u.s. market? >> it is kind of a global picture and that we are seeing a global gas shortage really accentuated by the u.s. you are seeing demand coming down but importantly, supply is not growing as much as it once would have in the years gone by. this comes down to a few things. the first is kind of the new wave of climate investment where banks are less willing to lend to oil and gas producers that are unsustainable, that have high debt in their balance book, that are not returning value to shareholders. the u.s. is not producing as much gas as it once might have.

it is harder to export that gas and it is contributing to the global gas shortage. romaine: it will be interesting to see whether any of this can sort itself out. our analyst helping us get a kick off to this conversation. we will continue that conversation right now. from the u.s. back over to europe, where we are seeing really this playing out in a way that has caught a lot of people off guard. this is also playing out in china and it comes at the crossroads of the global green energy transition. take a look at what the goldman sachs head of global commodity research had to say. >> this is just the first inning of a potentially decade-long cycle. we have the war on climate change, the war on income inequality. all of these dynamics lead to a structural rise in commodity demand. this idea, the revenge of the

old economy. i could point out, in the super cycle, the metal did not begin to 2008. we have a long way in front of us and this is just the beginning. basra the man on your mean -- the man on your screen, paul sankey. always great to get your thoughts. let's start off on the general expectation heading into where we are today for natural gas prices, for oil prices. it did not appear that the market was preparing itself. paul: that's right. i think we came out of a couple of things, last winter, which was globally cold, so it is unusual that all three major regions would be cold. we came out of winter with low inventories. the other thing you have alluded to, a country like the u.k. now

can be 25% dependent on wind power at any given time. we have been through a period here in europe where there has been very low wind. significant increases in gas demand, which is a replacement fuel, because company -- because countries like germany are shutting down all of their nuclear plants. all of that adds up to a sudden realization that there is a huge problem. the other thing to mention, a major gas field in europe is shutting down next year after 50 years of being a major supplier. then, there is the china coal shortage. absolutely insane. so, as a result, these markets, highly unconnected, causing a squeeze. you cannot say it is not going to be a cold winter until mid-december.

of months here where everyone is scrambling for everything available. by the way, to at a final point, the u.k. shut down 70% of its gas shortage capacity when it shut her off the gas fields in 2017. all of the energy transition moves, nuclear, shutting down gas shortage -- gas storage, increasing wind dependence come are coming home to roost. taylor: it brings up a good point. we were speaking with rebecca earlier and she said that when you transition so quickly and the goal and is in the right place to transition to a cleaner world. but it means you have to go back

and burn more fossil fuels because we were doing it without the appropriate investment. how are you thinking about a transition to cleaner fuel while doing it in a way that is reliable. >> it is not happening. for a start, this is all organized by governments. if you do it in democracy, it is a total mess. we have seen this in california, in texas. it is a mess. lumping of gas into the fossil fuel category with coal, which is idiotic, what you are ending up with his that it is burning more coal. this mess we are in in this stage of winter. it is not winter. sonali: it is still early days yet when it comes to the weather. you made this point over and over that they hedging is off in

light of the price swings. so, what does this mean for investors at the end of the day went they are looking to trade amid the search? paul: the obvious thought is that you are short the market and long oral -- and long oil. it is kind of an insane target, the extent they have been printing gold. you are not going to get inflation without oil inflation. it will come through in a very big way and that is what has happened. you can tell from today's market , bad for the market and good for today's oil companies. broadly speaking, what we saw today, the nasdaq gets crushed. romaine: i am curious, when we talk about why people are so concerned about some of these moves, there is also built into

with this idea of no one can really control it. the fed does not really have the kind of power over the commodities market as it does of her other areas of the financial market. from an oil perspective, there is only so much opec-plus can do to send prices into the direction at least in the short term. is this something that as investors they will have to adjust to? paul: number one, there is no government in germany right now. literally no government in the biggest economy in europe. that is very important obviously in terms of how we manage. with opec, the royal bank of saudi, we are questioning opec capacity. if you look at -- some of the major countries, nigeria, angola

are not producing to their quotas, so they can't even meet the current quotas. they are becoming very dependent on a limited number of countries capacity. my estimate is that we could get one million to 2 million barrels per day from natural gas, not to mention the additional coal. it is a little bit out of control here. of course, to the given extent, there is really a major underlying problem here, no question. taylor: at e.u. fix an underlying -- how do you fix an underlying secular problem when pretty much nobody but china has an ability to control a smooth transition? paul: i was not joking at all. look at the energy debate in the u.s., it is atrocious. you have joe biden coming on tv and saying we are going to be zero carbon in power systems by

2025. he means 2035 but that is impossible. it is kind of scary that the market will sort it out. you have measures in the u.k., a separate petrol crisis which is totally different. you have emergency regressive strategies. for example, california is opening up to burning oil to make power. sweden will be doing that. they will just be emergency reactions. one of the big triggers that can be pulled, the european government, the eu can relax carbon pricing and increased credit. that will certainly help the market if they can get their act together. that is a totally separate bureaucracy. it is funny, i was saying in my sunday notes, we predicted there would be a major problem with the energy transition, that the chickens would come home to roost. we did not think that what happened in the first year of

relatively normal activity in the september before winter. the situation is insane. don't underestimate this. taylor: paul paul: -- paul sankey, founder of sankey research, thank you for your time. stay with us because we will continue this conversation on the energy crisis next. this is bloomberg. ♪

romaine: today, we are focused on the big energy crisis going on globally. really the epicenter in europe. in days past, maybe europe would look to the u.s. for a little bit of help. at least the energy industry here is in no position to

actually really do much of anything. taylor: friday at 1:00 p.m., our long-awaited breakdown, but i know you are itching. every time it comes out. it sort of brings up a bigger issue, which is how can the u.s. bailout other people when we ourselves have not quite figured out the correct supply and demand dynamics as well. oil and gas rig counts as well, it has been on a slowly long-term projection a little bit of a decline. let's do all of this and more with campbell faulkner, the chief data land -- the chief data analyst. he formally worked in data analysis at jp morgan. equipped to help us address maybe risks on the horizon and how are you thinking about the u.s. as an lng, nat gas exporter. but already a pretty low count

here to begin with. campbell: it is tough. the rig count has been trending down. we have replaced rigs with more efficient rigs but we are just not really drilling. we had 99 last week. we have already had massive associated dry gas declines especially over the past 16 months. the pandemic did not help. there is not a huge ocean of gas in the u.s. that can be exported. five years ago, the big hope was that lng would be the savior of low gas prices. instead, we got the pandemic really crunching drilling. also, public firms are not really rewarded to putting ale budget capital back into the ground. unfortunately, it looks like we are going to have a gross under supply for this winter. it has just really put a lot of

pressure upwards on u.s. prices, jk, lng, the entire complex is now starting to function more globally and obviously with really sharp supply constraints at various points across europe, north america, and so on. sonali: there were the heat waves and now worry about the winter as well. what can companies and investors do to protect themselves against these wild swings in the weather? campbell: properly structured companies should be edging there risk. you know if you are naturally long or short. the problem is, once we start having these large prices, much like what happened when wti went negative, you may have a, let's say, vertical put structure or vertical call structure rolling month-to-month, buying one instrument and selling another.

in theory, you are relatively risk offset. the problem is we have seen a lot of firms cut out. europe, china, other places dealing with supply. it really gets back to you have your relatively firm supply spoken for. those prices are understood, negotiated. much like the 1970's, it is that spot supply, spot market, that can really cause dislocations. we factor in power burn, which has only been increasing over the past few years due to the retirement of coal. a giant up swell all across the globe. complicated and firms that have not been lining their energy prices because they have not needed to are really going to be hurting. romaine: talk a little more about the intersection here, especially some of the other energy sources. you mentioned coal, other

retirement. retirement in the nuke space as well. how much of that has exacerbated the problem we are in today? campbell: from our analysis, it has been pretty bad. that is why we have seen fixed-price power rocketing up. when you see a lot of the dispatch stack being replaced by intermittent gas. these were traditionally pickers. that has put a lot more pressure on the entire complex. new fleet retirement obviously in germany, is a big problem. the reason it is a big problem, it is relatively easy a lot of the year to import coal power to central europe. but you have supply constraints, other exaggeration, some winter event, that is when things can get really tight. the system is always so tightly wound that anything that can push it out of whack causes prices to go crazy. taylor: what then is the solution? campbell: the difficult part is

that it is going to be waiting period the cure for high gas prices is high gas prices. people will begin to drill again. we'll see crude pickup. it is just going to be a tough winter and that is kind of what traders are pricing in right now. romaine: appreciate you taking the time to contribute to the conversation. don't go anywhere. final play is next. taylor: it is likely final, final play. ♪

romaine: we had a great conversation today about the global energy prices. the epicenter in europe. the idea here that the u.s. is not necessarily going to be able to bail your about this time

around. it seems that a lot of these countries and regions are on their own. it will be interesting to see where the market forces end up taking over. taylor: i want to go back and listen because i am from california and he had some funny comments. campbell said california is going to have a rough winter as well. romaine: if you are driving up route 99 from fresno to, what is it, spokane? taylor: bakersfield. you call it the middle part of california. basra is it nice -- romaine: is it nice in bakersfield? taylor: i don't think that is what our producer wanted us to discuss. sonali: energy is not created equal. romaine: energy prices, having a

lot of downward pressure on other risk assets. that does it for "what'd you miss?" taylor: "bloomberg technology" is next. this is bloomberg. ♪

>> from the heart of where innovation, money, and power collide in silicon valley and beyond. this is "bloomberg technology" with emily chang. emily: i'm emily chang in san francisco and this is "bloomberg technology." coming up in the next hour, a sea of red for tech stocks. micron