Energy stocks prepare to dive. Was Trump’s Ukraine deal an inflation play, not peace?

Photo above - Kurt Russell ponders if Trump's Ukraine peace deal will lead to lower home heating prices. (Photo courtesy of "The Thing" 1988 film by John Carpenter).

The Russians seem ecstatic about the proposed Ukraine "land for intermission" deal. Should the USA be too? If Putin can resume selling oil and natural gas on world markets, that will probably mean US energy stocks take a hit. But gasoline pump prices go down for the rest of us. Should we root for Wall Street or Main Street here? (see link below)

The Reuters article is written from the perspective of Wall Street. Which it probably should be, since US stocks are at perilously high levels. On Friday the S&P 500 index hit another all-time high midday before closing at 6,450. The price earnings ratio is an astounding 30 (price of all US shares divided by their earnings). That means companies are banking just 3 cents for every dollar of share value. The only time it’s been worse in our lifetimes was in 2020, when the Wuhan China Covid-19 pandemic tanked US corporate earnings.

Bank to oil prices. A barrel of west Texas crude cost $16 when pandemic fears took hold. It then soared to $110 a barrel when Putin invaded Ukraine. Currently oil at $70. The long-term average is $20 a barrel. So there’s more downside on oil stocks than upside, barring another invasion somewhere. Drivers are unlikely to ever see $2 a gallon pump prices again though. And oil prices have almost zero effect on electricity costs these days. Prepare for a bunch of “I told you so” podcasts after EVs become more expensive per mile than ICE econoboxes. Ford's imaginary $30,000 EV pickup may struggle to find buyers, if it ever happens.

I’m rooting for main street here. Lots of people still drive to work, despite the throngs of Work From Homers lounging by our apartment pool on sunny weekdays. Lower gasoline prices could bring down produce prices at supermarkets. Airfares. Natural gas and home heating oil costs this winter if you where snow was supposed to go extinct. Didn’t Al Gore tell us NYC would be underwater by 2014 due to a polar icecap meltdown? If you heat your New England, Midwest, Northwest, or Mid-Atlantic home with natural gas or heating oil, you may be about to reap a “peace dividend”.

Rejoice, unless you have a lot of energy stocks in your 401K or IRA.

I’m just sayin’ . . .


https://www.reuters.com/world/china/global-markets-wrapup-4pix-2025-08-18/