In his 2012 book Power Plays, energy expert Robert Rapier says:
The current U.S. President and the past seven U.S. presidents — five Republicans and three Democrats presiding over a span of over four decades — have publicly declared that U.S. dependence on foreign oil is a national security risk.
This quote introduces the chapter titled “U.S. Energy Politics: The Elusive Goal of Energy Independence” near the end of Rapier’s book, and it offers us an incredible lesson on the power of market demand.
You see, although framed around energy politics, the issue of energy independence transcends politics as we know it and moves to the realm of market needs.
People demand cheap energy, and if politicians don’t deliver, they become unelectable. Each of these elected leaders (a noticeably bipartisan group) declares the reliance on foreign oil a risk, and yet none of them could do much to stop it.
According to Rapier and all available data, oil demand and imports rose “mostly unabated” during the terms of each of the last eight presidents.
As you can see in the chart above, energy imports for the United States have ballooned at an incredible rate despite the “protestations” of cowardly politicians who opted to do what’s popular instead of what’s right.
The only declines on the chart come during the oil embargo in the ’70s, when our dependence on foreign oil translated directly to a national security risk, and in 2009, when the recession rocked demand worldwide.
However, if you believe some recent data from the Energy Information Administration, this could all change in the near future.
And the transition will most certainly pay huge dividends to investors who take heed.
U.S. to Be Net Exporter of Fossil Fuels
Last Tuesday, the EIA released its much-awaited Annual Energy Outlook for 2015, and one of the most intriguing components of the 150+ page report concerned the future of U.S. exports.
The group used projected changes in supply and demand, the growth of renewable energy, and varied degrees of energy prices to determine the energy export future of the United States.
And according to the EIA, the U.S. could be a net exporter of fossil fuels in the next decade…
As the chart shows, the United States should reach net energy exporter status (exports higher than imports) sometime between 2020 and 2030.
If energy prices and resources are high, this could come sooner — as soon as 2019.
On the other side of that is a situation of low oil prices and resources in the U.S. In that case, we’ll remain a net importer through 2040.
Although all of these projections were made based on the different scenarios for oil prices in the future, the reason we would be a net exporter has very little to do with oil.
Instead, the true hero of U.S. exports will be natural gas.
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Long-Term Natural Gas Bull
Investing in natural gas today is the best decision any energy investor could make.
You see, natural gas exports via pipeline to Mexico and Canada and via tanker as liquefied natural gas (LNG) are going to transform the United States into an exporter… and a big one at that.
Add to this the fact that the EPA is essentially making coal power plants obsolete by opting for natural gas plants instead, and you’ll see that in the next few years, demand will rise tremendously.
And when demand rises, so do prices — which will send natural gas stocks in the U.S. much, much higher.
Building a position in natural gas for the long term is a no-brainer.
The question then becomes, what’s the best way to do so?
Of course, there are plenty of ETFs and other instruments that deal with natural gas, but a lot of those indices have already seen the potential of natural gas factored into their valuations.
It’s the same with Marcellus gas stocks and soon-to-be LNG shippers Cheniere (NYSE: LNG) and Sempra Energy (NYSE: SRE).
Plus, the Marcellus is already booming despite the bear market in commodities:
It’s going to be difficult to find a play that’s flying under the radar in the Marcellus right now, especially with what could be a period of mergers and acquisitions ahead.
Instead, the best way to maximize profit potential for natural gas is to play its production growth in other formations like the Bakken, Eagle Ford, Permian, and Niobrara.
Yes, the Marcellus is a huge gas formation, but if the U.S. is going to supply South and Central America as well as Europe and Asia with natural gas, the other big formations in North America will have to start growing gas production.
Good Investing,
Alex Martinelli
With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor’s page.
