With stories about the end of oil - or coal, gas, nuclear, etc. - seemingly appearing every day, many of you have asked me about what the future of energy looks like.
Now, my premium Energy Advantage members just received their 2018 Energy Forecast special briefing. Inside, they saw exactly what to expect from oil, gas, lithium, and other energy sources in 2018... and how to profit.
But I already have my mind on a far more important date...
A date when we will enter into a new energy balance.
That date is 2020.
Here's what that will look like.
There Are No "Silver Bullets" in Energy
Now, regular readers of Oil & Energy Investor already know what I'm referring to when I mention the energy balance.
This is not the relationship between supply and demand.
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What is needed in both the domestic and global energy markets is a genuine balance in energy availability. That requires multiple sources providing energy as seamlessly as possible.
This is not about discovering some single source that will transform the energy sector.
All energy sources are required. It's the integration of these sources that translates into the most efficient, cost-effective, and best solution for both producers and consumers.
And when we look at what the energy balance picture could be here in the United States by 2020, this is what we find...
The 2020 Energy Balance
2020 will find a continuing, although slowing, decline in coal usage and a rise in renewables in the United States.
Major impediments to solar and wind occupying a greater percentage of generating volume - such as storage capacity concerns and grid parity (equivalence in cost with traditional sourcing) - are being overcome.
Still, and this is the crucial consideration still overlooked by supporters of renewables, the overall power generation system requires redundant capacity.
After all, solar and wind only generate power when the sun shines or the wind blows.
The real problem advancing on this front has to do with how electricity is transmitted and distributed. The aggregate power grid is well beyond its useful life with breakdowns occurring more and more frequently.
Each year that passes without a major overhaul is one year closer to a looming energy crisis.
The issue isn't whether we have enough power; this is all about grid delivery.
As for U.S. transport, there will be some move to electric and compressed natural gas/liquefied natural gas (CNG/LNG) in vehicle conversions.
On the other hand, much of this has already been factored in since it concerns higher-end truck fleets. Passenger car conversions remain more expensive and less in demand.
It is likely we will witness a lowering of the overall usage of gasoline and diesel, with some of the latter being replaced by biofuels and clean energy sourcing rather than hydrocarbons.
But old-fashioned oil products will still be the primary transport fuel.
All of this means one thing.
The energy balance will witness some changes in the overall breakdown among sources. But a full spectrum of distinct sources will still be required, especially in the United States and Europe.
But much of the rest of the world will continue to use both oil and coal as primary energy sources for decades.
Especially this part of the world...
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The Biggest Oil Glutton Is...
Asia will account for the clear and uninterrupted spike in global energy demand that we'll be witnessing for at least the next two decades.
That demand will be met with oil and coal.
Of course, other energy sources will also play a part, including:
- Ambitious solar and wind projects
- Unconventional (shale and tight) natural gas reserves
- More and more nuclear power plants coming online
- And aggressive goals for the adoption of electric vehicles
All of these - and more - are on the agenda in Asia.
Unfortunately, these will do little over the next two decades other than to slow the increase in the continent's use of oil and coal.
Expansion into more efficient energy end-use and the rise of broader smart-circuit technology will have some, yet still limited, impact.
The reason for all of this is straightforward.
Asia's accelerating population growth will dwarf everything else.
Any serious discussion of the energy balance must take this overarching pressure into account...
And that is the final piece of the American energy balance puzzle...
Why Asia Is Key to American Production
What happens in Asia will have a huge impact on what is produced here at home.
Crude oil exports from both the United States and Canada are increasing to higher-priced Asian and other foreign markets. That combines with the fact that American refineries already lead the world in the export of oil products.
Meanwhile, LNG exports from North America to both Asia and Europe are on the rise.
All of this presents exciting opportunities for U.S. oil and gas producers to sell abroad, even if the domestic usage side of the equation only changes marginally.
For us, this all means one thing.
The next two years - and beyond - will be brimming with profitable energy plays.
And we'll be there to jump on each of those opportunities as they come.
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The post What the Energy Market Will Look Like in 2020 appeared first on Oil & Energy Investor.
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.