U.S. Continues to Move to Energy Independence: Benefits to Stock Investors

This post deals with the United States march towards energy independence.  This would have seemed impossible to anyone who sat in long gas lines to fill their gas tanks in the early to mid-1970’s.  Who remembers lining up on alternate days based on the letters or numbers in the license plates? The pronouncement that we would be energy independent always seemed hollow when heard from the mouths of numerous politicians.

But today – the dream of the United States not only being energy independent but exporting energy is taking shape.  Fuel is necessary to drive the economies of the world.

A myth that has been around for decades was that we were going to run out of fuel here in the U.S. and would need to import all of our energy needs.  However, once again, new technologies that could not have been foreseen have been developed by companies that will have a transformative impact on our energy future.

New technologies of fracking and horizontal drilling have allowed large areas of the U.S. to be ‘drilled’ for natural gas which also burns cleaner than the traditional fuel source of the U.S. – coal.  Score another one for American Ingenuity!

It is estimated that the United States today now has the largest combined gas, oil, and coal resources in the world.  With the opening of federal lands to new drilling by 2020, the U.S may also become the largest producer of all three as well.  California alone may have 35 billion barrels of oil reserves in the Monterey Shale formation.

Late last year, the WSJ reported that the U.S. had become a net exporter of natural gas which is reshaping the global energy business.  In Nov. 2016,  the U.S. has exported an average of 7.4 billion cubic feet a day of gas more than the 7 billion cubic feet it has imported, according to S&P Global Platts, an energy trade publisher and data provider.  It has been nearly 60 years since the U.S. last shipped out more natural gas that it brought in annually, according to the U.S. Energy Information Administration.

Gas exports have risen more than 50% since 2010.  By 2020, it is estimated by the Energy Department that country will be the world’s 3rd largest producer of liquefied natural gas for export by that year, trailing Australia and Qatar.  The majority of the exported gas is now sent via pipes to Mexico and Canada.  It is expected that Asian counties such as Singapore and South Korea will be new markets soon.

Victor Davis Hanson, a Senior Fellow at the Hoover Institution, has written the gradual displacement of coal by natural gas from electrical production will not only help clean the American atmosphere (it has started already), but also create an industry of coal exportation to the fast growing, energy hungry, resource poor countries of China and India.  It also has the additional benefit of reducing our trade imbalance with China.

Companies are always attracted to inexpensive fuel sources and this transformation will help U.S. companies already here and attract additional companies from energy-dependent industries such as those in the petrochemicals, fertilizers, and steel and aluminum production.  This is good news to both U.S. consumers of energy and the U.S. workforce.

You should continue to focus on the long-term benefits of investing in the great companies in the U.S.  and overseas who will be the beneficiaries of this transformation.  Own stocks for the long-term.

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