Canada stands to benefit from increasing investments in commodities, at a time when energy volatility and security challenges weigh on many countries, according to Rafi Tahmazian, senior portfolio manager and director at Canoe Financial.

In a note to clients Monday, Tahmazian said in the coming quarters he expects there will be a larger focus on countries with natural resources.

“This (energy security) has important investment implications, especially for countries such as Canada which have more than 30 per cent of their equity markets exposed to energy and materials,” Tahmazian said.

“We believe we are in the initial stages of funds flowing back into commodity-rich Canada.”

 

GROWING CONCERNS AROUND ENERGY SECURITY

Tahmazian pointed to energy security as the main reason for why he sees additional investments in Canada over the coming months.

“It’s becoming obvious to us that we’re entering a new era of higher-for-longer energy prices and ongoing energy security challenges,” Tahmazian said.

“We believe consumers will continue to be vulnerable to energy price spikes and some areas of the globe will even experience periods without energy.”

Energy security has become a big issue in Europe, as the European Union (EU) looks to reduce its dependence on Russia.

On Dec. 5, EU sanctions on Russian crude by sea will come into effect. On the organization’s website, it says “as the majority of the Russian oil delivered to the EU is seaborne, these restrictions will cover nearly 90 per cent of Russian oil imports to Europe by the end of the year. This will significantly reduce Russia’s trade profits.”

Many countries in Europe are also moving to stockpile fuel ahead of the winter in order to avoid shortages. This comes as the region faces its worst energy crisis in 50 years, with Russia cutting its natural gas deliveries after the EU placed sanctions on its crude.

“The region, with its dependence on Russian gas, will be extremely vulnerable to weather conditions over the next couple of winters,” Tahmazian said.

“We believe hoarding action like this is a sign of things to come as governments try to protect the lower- and middle-class consumer, but it comes at the expense of increased government debt, decreasing purchasing power, and reversing climate change agendas.”

Energy vulnerabilities came into focus last month after the Nord Stream 1 and 2 pipelines experienced four major gas leaks.

On Tuesday, Danish authorities reported “powerful explosions” that damaged at least 50 metres of underwater pipeline. A video shot by a Norwegian robotics company and published by Swedish newspaper Expressen shows a massive break in the Nord Stream 1 pipeline.

Tahmazian said there has been signs of a “developing energy crisis for years now that have been largely ignored until recent European developments brought to light the very real impact on energy consumers.”

“As Europe heads into winter, natural gas inventories there are significantly higher than historic averages as countries paid any price to replenish storage from extremely depressed levels in the spring,” he said.

“And what’s less talked about, are the ten-fold price increases consumers had to bear to rebuild storage or governments reversing coal closures in an effort to meet consumer need this winter.”