Key Themes That Will Redefine Europe

Key Themes That Will Redefine Europe
Energy independence and energy transition were highlighted in a new BofA Global Research report.

A new BofA Global Research report has identified seven key structural themes that will redefine Europe given the Russia-Ukraine conflict, and two of those are energy related.

Energy independence and energy transition were highlighted in the BofA Global Research report, with the former being described in the report as “the number one strategic priority”.

“It will take a long time, we think longer than most anticipate, and it will require significant investments in gas infrastructure, low carbon energy sources and carbon capture,” the report stated.

“We think European gas prices will remain above $200/boe (more than 6x pre Covid levels) for the foreseeable future,” the report added.

The report noted that energy transition is the enabler for Europe’s energy independence objective.

“We expect more investments in what were already growth industries. It doesn't come without challenges but it means more growth for renewables (wind and solar), hydrogen, electricity and gas infrastructure, nuclear, biofuels, EVs and energy efficiency will also be in focus,” the report said.

Bofa Global Research analysts outlined in the report that they believe the Russia-Ukraine conflict “is one of those rare events in history that will reshape geopolitics, societies and markets”.

“Europe will transition to be more independent and redefine many of its sectors and economic paradigms,” the report stated.

“The consequences will range from the development of new industries, the acceleration of existing ones, additional infrastructure and technologies, while reaching independence and leadership for some,” the report added.

“It will come at a cost; some industries may end up at the high end of their industry cost curves, inflation and interest rates may end up higher for longer, and low income consumers could be the big losers,” the report continued.

Om March 21, the European Commission launched a special call under the Technical Support Instrument to support member states welcoming refugees from Ukraine and the phasing out of their reliance on fossil fuels from Russia. Following the call, the commission outlined that member states can immediately send requests to the commission for technical support with regards to phasing out Russian fossil fuels, including identifying the best reforms and investments at national, regional and cross-border level.

Last week, the European Commission announced the adoption of a fourth package of “restrictive measures” against Russia “in response to its brutal aggression against Ukraine and its people”. This package of measures included a “far-reaching” ban on new investment across the Russian energy sector, with “limited exceptions” for civil nuclear energy and the transport of certain energy products back to the EU.

Last month, oil soared past $100 per barrel for the first time in years as Russian forces escalated a conflict with Ukraine.

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