Thanks to recent breakthroughs in shale and natural gas, and the abundance of fossil and renewable fuels, it's likely the United States is now just five to 10 years from attaining "energy independence." Remarkable when you consider it's been a policy "Holy Grail" of every president since Nixon, and just 10 years ago we were importing 70% of our daily needs.
Now, this does not mean there will be no U.S. energy imports. This country will of course import energy when it's cost-efficient and profitable, but it will no longer do so to fill market demand.
We're on the brink of a completely new era, with huge implications for investors across the broad spectrum of energy segments.
But for everyone concerned, the new energy balance will be delicate. The "transition" to energy independence will be dicey to manage politically and administratively. There are no silver bullets or quick fixes.
To maximize upside, investors will have to be nimble and move into the investments I'm going to show you today and in the coming months.
Let me explain...
It's All About Energy "Balance"
As the United States progresses with improving energy production and exploration, markets will still require a number of different sources - an "energy balance" - that will continue to include more conventional energy sources along with the rise of renewables.
Pursuing a balance of sources requires us to optimize the usage of oil, natural gas, coal, nuclear, and renewables in a multi-sourced environment. The key is to provide as much interchangeable energy as possible. Naturally, this diversity improves our national security picture, because we don't have to be overly reliant on a single fuel or technology.
This strategy allows one source to compensate for others in a more efficient network. But for this to happen, there needs to be continued expansion in all of the major energy categories - and some serious attention given to the production and delivery of infrastructure among them.
Meanwhile, expanding the U.S. energy balance, as I have often said in Oil & Energy Investor, has never been a search for a "silver bullet" to wean us from dependence upon foreign crude oil (or domestic, for that matter).
Not only is this unrealistic, but it also cripples the American workforce and kills local economies from California through Texas to Pennsylvania, as well as damaging the national market as a whole.
This is not about replacing which energy source is dominant on a whim. Markets left to their own devices do a rather good job of making those decisions for us. In some places, efficiency becomes the driving force. In others, it is reliability. In others still, maintaining employment and income flow may take precedence, even if that means higher prices or environmental tradeoffs.
I am certainly not saying that one of these always needs to reign supreme. Instead, what is important is how the transition is managed...
How Trump Should Handle the U.S. Energy Transition
The mood in the "new" D.C. seems to support a return of a national energy policy dominated by fossil fuels and an increasing indifference to what the rest of the world may think.
Trump's campaign pledge to make the U.S. "energy independent" has largely been regarded as nothing more than a move to support more oil and natural gas drilling, as well as an increasing reliance on coal.
However, there's no escaping the fact that coal is permanently declining in importance. The new American energy market cannot sustain it.
As I mentioned, to focus on any one at the expense of another would be a big mistake. A necessary cog in the energy balance and national energy self-sufficiency is renewables, specifically solar.
At the outset, nobody associated with the incoming White House has voiced any particular opposition to solar. After all, in many parts of the country, solar has made significant gains over the past several years and reached grid parity, that is, equal or lower power generation cost with more conventional sources of power generation, like coal and gas.
The problem comes from elsewhere.
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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.
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