What Investors Should Know About the U.S. Becoming a Net Petroleum Exporter
How to Profit from the Return of U.S. Oil Dominance
The headline rang out loud and clear...
U.S. Posts First Month in 70 Years as a Net Petroleum Exporter
Flag-waving Americans cheered the news that the U.S. posted its first full month as a net exporter of crude and petroleum products since records began more than 70 years ago.
And make no mistake: Relying less and less on foreign imports should not go unnoticed, nor should it be trivialized.
That being said, it should also not go unnoticed that most of this domestically produced crude comes from shale, which, while inconvenient for some to admit, cannot continue to be produced at the rate at which it’s being produced now.
As reported in Bloomberg, in the top five shale basins, wells that came on in 2018 are declining at their fastest rates yet. And we already know that with shale, wells typically face decline rates of between 75% and 90% in the first three years.
Yes, more drilling and new technological breakthroughs can stave off the inevitable for a little while, but ultimately our reliance on shale will dwindle.
Of course, maybe this won’t be such a worrisome event when you look beyond monthly production and supply reports.
Everything Changes in 10 Years
Back in 2007, I predicted that a company called Tesla (NASDAQ: TSLA) would become one of the most important car manufacturers in the world.
At the time, that prediction was met with rolling eyes and sarcastic criticisms. After all, back then, there was no highway-capable electric vehicle on the road. Fast-forward to today, though, and Tesla has sold more than 720,000 electric vehicles.
In addition, nearly every major automaker today has an electric vehicle either in the showrooms, on the roads, or in development. And that’s while electric cars are still a bit pricier than their internal combustion counterparts.
But that’s not going to last.
According to Bloomberg’s latest report on electric vehicles, thanks mostly to a decrease in battery costs, the price parity between electric vehicles and internal combustion vehicles will be reached in about five years. And this is the primary driver behind a very inconvenient truth for internal combustion bulls: In 20 years, more than half of all passenger vehicle sales will be electric.
57%, to be exact.
Meanwhile, with this increase in electric vehicle demand, along with newer internal combustion vehicles coming to market with higher fuel economies, we’re not far off from a peak in gasoline demand.
According to Wood Mackenzie, global gasoline demand is likely to peak in about 10 years — merely a blip in time when you consider just how quickly 10 years can sneak up on you.
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Prosperity Plays the Long Game
While you can still make a ton of cash by gaming oil markets, energy investors would be wise to take note of a certain reality that’s setting the stage for new opportunities in a transportation economy that will ultimately favor non-internal combustion vehicles.
Passenger cars, light-duty trucks, commercial buses — most are being transitioned away from internal combustion to electric. But you shouldn’t see this as a threat. You should see it for what it is: an opportunity to create wealth.
This particularly goes for Americans who believe that patriotism is synonymous with oil production, and anything that goes against that narrative is borderline treasonous. Even writing this sounds absurd, but there’s truth to this.
The announcement that the U.S. is a net exporter of crude made a lot of folks swoon with a general sense of nationalistic pride. Not that there's anything wrong with this. After all, with that announcement, it became official: We’re back on top!
But does it really matter anymore?
If the demise of the internal combustion vehicle is inevitable, does it matter that we’re a net exporter? Does it even matter that our rise to the top rests on the shale production we’ve been pumping out — something that simply can't be maintained at current levels?
The truth is, if we want to get patriotic about producing something in the U.S. that people all over the world need, perhaps we should get excited about new transportation technologies that can provide jobs here at home while still maintaining strong trade relationships in other parts of the world.
I’m talking about new transportation technologies that have the potential to make our lives better, our planet cleaner, and our economy stronger.
Looking at the long-term outlook for oil production, none of those things can be accomplished.
Increased oil production at a time when we know demand is going to wane does not make our world better. It does not make our planet cleaner or our economy stronger, either. At least not in a long-term, sustainable way.
And really, isn’t that what we should be focused on? The long game?
I would argue that those who consider themselves patriots who want to see the U.S. economy thrive should absolutely embrace the long game when it comes to transportation. And there’s no question, from an investment standpoint, that such a focus is paramount to your financial success, too.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.
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