Today I want to give you two of the best investments in energy security – one of the most important new opportunities in the oil and gas sector.
Energy security stems from the accelerating need to protect the production, transport, and distribution of our newfound wealth in oil and gas.
This point was hammered home on Jan. 15 with the release of Oil Security 2025: U.S. National Security Policy in an Era of Domestic Oil Abundance.
The 108-page report is the inaugural effort of the Commission on Energy and Geopolitics. Admiral Dennis Blair, former Director of National Intelligence and Commander in Chief, U.S. Pacific Command, and General Michael W. Hagee, 33rd Commandant of the U.S. Marine Corps, served as co-chairs.
The report reflects matters I have discussed before: the rise of security issues surrounding new domestic oil finds, increasing geopolitical tensions, and the changes in the energy balance, both from a supply and a demand perspective.
In this case, the transition of supply from conventional to unconventional sources, combined with a new emphasis on domestic U.S. production, certainly has both global and security considerations.
But it's the changes on the demand side that are even more striking…
In fact, the rapid transition of end-market requirements from the developed states (North America, Western Europe) to the Asian-Pacific basin will transform energy markets moving forward. That has long-term implications for America.
With the intensifying call to accelerate both crude oil and oil products exports from the United States along with the American emergence as a major exporter of liquefied natural gas (LNG), the new global trading dynamics can't help but have increasing security concerns.
And while the report did review previous international oil disruptions, the real security concern it emphasized involves the energy sector here at home.
The U.S. Oil Boom Has Changed Everything
The single most important change in the energy picture across borders comes from the rapid move toward self-sufficiency in North America.
Fueled by huge reserves of shale and tight gas, coal bed methane, tight oil, and heavy oil (including oil sands and bitumen), combined U.S. oil and gas production for 2013 will come in at a higher daily level than experienced in more than three decades (the official figures are still about a month away).
That fundamentally changes the dynamics of global energy flows and the security considerations right along with them. As a sign of this major shift, the current OPEC planning document now assumes that no cartel member will be selling any oil to the United States by 2050.
Meanwhile, well before that date (some analysis now indicating within the next 15 years), American crude oil import needs will fall to about 30% of daily our requirements… and virtually all of that will be coming from Canada.
This is a huge shift. Just a few years ago, the American market was looking at having to import 70% of its needs.
The domestic production increases, therefore, have a dramatic impact on both the U.S. and global markets – the United States because of its expected advantage in economic development, and globally because of the shifting assumptions about who actually is dictating the supply.
In all of this, a new dimension is already emerging in energy.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.