What is vitally important to shaping the direction of the economy
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What is vitally important to shaping the direction of the economy

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Energy has long been, and continues to be, one of the most important issues faced by the United States. The dependence on scarce resources has fostered corrosive politics at home and abroad – and efforts to generate renewable energy have provided few viable alternatives to traditional fuels.  For the foreseeable future, fossil fuels will likely continue to dominate the energy landscape in the United States. The trends that influence them are vitally important in shaping the direction of the economy and the market.

  • Dependence on foreign oil has long been an issue for the United States, and significant efforts have been made to reduce the need for it. The most recent figures suggest that these efforts have been successful, as the U.S. imported just 42% of oil consumed last year. This represented a 15 percentage point de-crease from 2008, and a drop to the lowest level in two decades. This decline is projected to continue through the year 2025.
  • Hydraulic fracturing is just one advancement that has contributed to a marked increase in production, which has almost doubled since 1986i. Indeed, spikes in drilling combined with decreased short-term demand (as a result of one of the mildest winters on record) brought natural gas prices down 86% from highs in the middle of the last decade, and caused some gas to be sold for less than the cost of taking it out of the earth .
  • There is a huge opportunity for those that transport these resources – the companies that operate pipelines. There is a critical short-age of pipelines in the United States right now, and some companies have had to resort to “flaring” or burning off extra fuel when it comes to the surface because there are not enough pipelines to transport it. Free market economies do not tolerate these kind of inefficiencies for long, and these companies stand to benefit greatly as they rise to meet this demand.  Finally, the fate of alternative energy companies is predicated upon prices for fossil fuels. When fossil fuel prices are high, demand for renewable energy increases proportionally, and green alternatives become not only more viable but also more economical.

The opinions and forecasts expressed are for informational purposes only and may not actually come to pass.  This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan.  The representative does not guarantee the accuracy and completeness, nor assume liability for loss that may result from the reliance by any person upon such information or opinions.

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 Kapadia, Abkowitz, Salisbury, & Sullivan. “The Return of Fossil Fuels”.
 Smart Money Magazine, August 2012 Edition.\ “Natural Gas Extraction – Hydraulic Fracturing” Environmental Protection Agency. http://www.epa.gov/hydraulicfracture.