As recently as a couple of years ago, many politicians and other members of the chattering class were saying we couldn’t drill our way to energy independence. But the face of energy production in the U.S. has changed dramatically in the last two years, and today most of those people are snacking on their own words.
Net imports of energy fell from 30% in 2005 to 13% in 2013 and are likely to keep dropping. New technology has opened up previously inaccessible resources and more exploitable reserves are being discovered. Production has boomed to point that last year the U.S. surpassed Saudi Arabia as the world’s largest oil producer. So does that mean that Energy Independence is on the horizon? And if so, when? Well, that depends on who you ask.
In its annual Energy Outlook report released on April 14, 2015, The US Energy Information Administration thinks it could be as early as 2030, or even sooner, depending on where oil prices trend over the next decade or so. Their midrange prediction of gradual increases approaching a return to near $100/barrel oil over the next 15 or so years has imports falling below 5% as early as 2025. On the other hand, if prices more quickly—say to $100 in a year or two—the U.S. could become a net exporter by the end of the current decade. Even if prices stay under $80 per barrel, imports could decline to 5% in 25 years, a level that’s independent in all but the strictest sense.
These estimates also factor in growth in alternate fuels and sources of renewable energy, as well as ongoing savings through increased efficiency, and that may be harder to predict than oil prices. Interestingly though, the EIA report sees solar power increases dropping off after the expiration of credits in 2016, discounting the impact of improved technology and lower prices in that area. Given the R&D devoted to solar, that seems unlikely, and additional gains in that field could reduce our dependence sooner, as well.
Political and economic factors enter into the picture, too, but short of a major shocks or miscalculation by forecasters, we’re unlikely to ever see Carter-era lines at gas pumps caused by OPEC or other unfriendly foreign cartels again.
How will these changes in the oil and gas picture affect investors? No doubt energy companies will be challenged to adapt in order to prosper in the coming years, and the opportunity for investors will be in identifying those businesses that can meet the challenge.
The oil and gas experts at BWAB track industry trends, identifying hidden opportunities in oil and gas properties that offer excellent values for both institutions and individual investors. While others are preoccupied with negatives, we’re busy finding companies positioned to thrive in today’s volatile markets.
We invite you to visit our website, BWAB.com, to learn more about our investment strategy, philosophy, and proven record in maximizing investor returns by building value through capital reinvestment, operational improvements and enhanced recovery and cost control.