Investment Opportunities in Energy Independence

Most likely, oil prices will not be going below $60/barrel, and this will encourage continued attention and investment in making America more energy independent. This represents an opportunity both for America, but also for those who invest in this trend.

Right now, America is dangerously dependent on oil from places like the Middle East, Nigeria, Venezuela, Russia, and surrounding areas with names ending in -stan. The last time that oil prices peaked, they were brought back down to about $20/barrel, mostly by Saudi Arabia, whose actions made it clear that it was the leading oil exporter and could control the oil market. Moreover, the Saudis know that, if oil prices stay high, it will encourage development of alternative energy sources. This time, Saudi Arabia lacks the spare capacity to single-handedly drive oil prices below $30/barrel.

Now that oil prices have stayed above $100/barrel for most of the year, there is renewed interest, not only in alternative energy sources, but specifically in developing domestic sources that are not subject to geopolitical risks.

There are many opportunities for increasing America’s America’s energy resources include coal, oil shale, tar sands, oil, natural gas, nuclear, wind, solar, geothermal, ocean wave/tidal power, trash-to-energy, biomass, and a few exotic sources that probably won’t be major sources. Hydrogen is touted as a super-clean fuel that, when burned or processed in a fuel cell, produces only water as a byproduct, but it must be produced somehow, generally by using electrical energy to extract hydrogen from water; a process that uses more energy than is returned by burning the hydrogen, so hydrogen should merely be thought as a way of storing energy. Conserving energy through reduction of waste, increased efficiency, and simply reducing consumption will also make significant reduction in energy requirements.

Some of these energy sources are dirtier and have a greater impact on the environment than others, sometimes in ways that are less obvious: Raising corn to turn into alcohol to burn in cars requires massive amounts of fertilizer and other agricultural chemicals that run off into rivers and ultimately into lakes and oceans — the most visible impact of this has been the creation of a dead zone in the Gulf of Mexico the size of the State of New Jersey!

Digging up oil shale, tar sands, strip mining for coal, and drilling for oil in environmentally sensitive areas will understandably run into stiff opposition. Even wind farms have environmental impact on certain bird populations. Nevertheless, there will be pressure to look to all possible energy alternatives over the next decade as cleaner sources are developed.

Boone Pickens, the oil man, has his own thoughts about how America can increase its energy independence, by tapping into wind power to replace existing natural gas used to fire electric generating plants. This natural gas could then replace 38% of oil used in gasoline for cars and for other transportation fuels. This would be a good start toward energy independence and, while there are already wind farms in operation, there are plenty of opportunities for new wind farms. See Boone Pickens’ presentation below.

The point is that, while energy independence didn’t get a lot of traction in the 1970s through 1990s, the steep rise in energy prices and dependence on foreign sources we encounter now will unleash powerful market forces that will be reinforced by government support for developing domestic resources and its supporting infrastructure. Those who seek out and invest in prudent opportunities that will present themselves will be benefiting from a long term trend, while gaining additional satisfaction that they will be promoting the common good.

Boone Pickens’ Presentation:

For more information on this trend see a video interview with Steven Forbes.

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