Demand for oil will keep growing… no matter what.
"Population growth and a desire for higher living standards will increase usage of petroleum-derived fuels," said Exxon CEO Darren Woods at the firm's annual shareholder meeting in Dallas yesterday (May 31).
Woods' remarks simplified a statistics-based reality outlined last November by Fatih Birol, executive director of the International Energy Agency (IEA).
"Global oil consumption will continue to grow to 2040," Birol said, according to Forbes on Nov. 11, 2016, "despite the Paris Climate Change Agreement reached [in 2015] to try to cap greenhouse emissions."
To this point, Woods told XOM shareholders that the United States should stay in the deal in order to keep ongoing global environmental efforts – such as stronger emissions caps — from affecting the oil companies' profits.
In doing so, the United States could also maintain good standing with our trade partners across the world.
Indeed, although there are no punitive measures outlined in the Paris Accord, repercussions could emerge collaterally if America bows out. For example, China recently threatened the United States with negative trade ramifications should Trump refuse to attend.
Money Morning Global Energy Strategist Dr. Kent Moors also believes the United States should stay with the international agreement for the sake of protection.
But Kent's reason is slightly different – and more altruistic, perhaps – than Exxon's…
Exxon Mobil Protects Its Money; Kent Moors Protects Your Money
Kent wants to protect your money from the Paris deal while helping you make more. And he's scrutinized the deal since its Dec. 12, 2015, signing in search of underlying profit plays (much of the time while actually in Paris). Like Woods and Birol, he too believes that global oil consumption won't stop anytime soon.
And efforts – especially hasty ones made on a global scale – to curb both petroleum consumption and greenhouse emissions simultaneously could ultimately hurt Americans.
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On April 17, Kent wrote that the "U.S. energy balance" has never been a "search for a 'silver bullet' to wean us from dependence upon foreign crude oil (or domestic, for that matter)."
Such an endeavor, he said, is wholly unrealistic and could "cripple the American workforce and kill local economies from California through Texas to Pennsylvania."
That devastating effect could occur – especially if the United States backs out of the deal – because of the various ways Americans rely on foreign oil in order to thrive.
Have a look…
- An April 16, 2016, report from PricewaterhouseCoopers, a London-based international auditing firm, found global oil and gas companies directly employed 9.8 million Americans on U.S. soil at the time – 6% of the U.S. workforce.
- According to the U.S. Energy Information Administration (EIA) on March 29, 2017, 24% of the oil consumed in the United States last year was used stateside to make petroleum-based products. These products included heating oil, jet fuel, chemical feedstocks, asphalt, and biofuels. A significant dip in U.S. access to this foreign oil could put thousands of jobs at risk while causing prices for these products to inflate significantly.
- In 2016, U.S. consumers used about 144 billion gallons of finished motor gasoline, the EIA reported. This was the largest amount of annual motor gasoline consumption on record. On top of that, America consumes more natural gas than any other country in the world – 773 billion cubic meters' worth. Russia comes in second with 453 billion cubic meters – slightly more than half as much natural gas as America uses.
These are all reasons for the global community to make major changes under the Paris deal – and, yes, to U.S. consumers' economic and manufacturing detriment.
But with a reserved seat at the Paris deal's table, the United States could take steps to avoid economically stringent standards such as even more suggested caps and regulations.
And on top of all that, America leaving the Paris Climate Accord would also mean ignoring the obvious…
The move toward renewables that's happening anyway.
Curbing the Outcome by Joining the Effort
Renewable energy efforts already in effect worldwide exhibit the "irreversible trend that's gaining momentum," Jeff Eckel, CEO at Hannon Armstrong Sustainable Infrastructure Capital Inc., told Bloomberg on May 31.
Indeed, this is an area in which the United States is actually already thriving. Still, the U.S. could economically flourish even further by strengthening its efforts via relations borne of the Paris deal.
Because these efforts produce renewable profits that are being unlocked for investors by the minute…
For example, Kent's Energy Advantage readers have already begun to profit from the best of those domestic companies leading the United States into this new energy age.
One such company is Valero Energy Corp. (NYSE: VLO), which is up over 300% since Kent first recommended it in 2011.
Have a look at more of Kent's "Energy Revolution" profit plays right here…
- Bloomberg: Exxon and Conoco Reiterate Support for Paris Climate Deal
- Forbes: Troubling News for the Planet: Oil Demand to Increase, Despite Paris Climate Change Accord
- Money Morning: Make No Mistake: The Banks Are Manipulating Oil Prices Right Now
- Money Morning: How a Single Imaginary Line Is Pushing Oil Prices Up