A Nation Re-energized

“Human innovation is the only natural resource we have.”
– Julian Robertson, Founder Tiger Management

Innovation and technology are causing dramatic shifts in America’s energy reserve estimates a recent research report from American Funds says.

Several entities, including the Department of Energy, now estimate the nation’s natural gas as so vast that it could be a game changer for the American economy, and a competitive advantage for many US companies if fully developed.

The report entitled The Long View provided great perspective on the breakthroughs that are occurring with traditional energy.

“The United States is in the midst of an extraordinary transformation,” it reads, “and these changes may have the potential to redefine America’s economic future.”

These breakthroughs have the potential to profoundly affect our country’s economy and policies for years to come. Advances in drilling shale for oil and natural gas sparked what could be considered a revolution in terms of business activity in this county.

US manufacturers may have the most to gain from abundant affordable natural gas. Low cost gas should enable U.S. companies to be more competitive globally in petrochemicals and energy-sensitive industries.

The innovation of “fracking”, which is a technology used to recover natural gas from shale has both its fans and opponents. Water contamination fears are a demonstrable concern and highlight a process that must be carefully managed. Thus we see the political and environmental hurdles involved in making this idea a reality.

Despite the concerns, the adoption rate for natural gas has been promising. Today you can find it in trucking fleets, industrial machinery and electric utilities. But tomorrow you could find it powering our vehicles, aircrafts, in our fertilizer, and in hydrogen production.

Natural gas has the potential to bolster our nation’s economy, decrease our dependence on foreign oil and revitalize many U.S. industries providing greater employment to perhaps thousands.

Some interesting data points:

• It is anticipated that by 2035 nearly half of the heavy trucking will be powered by natural gas.
• Shale gas production supported more than 600,000 jobs in 2010, and is anticipated to increase to 1.6 million by 2035
• In 2011 natural gas produces 25% of our electricity, up from 18% in 2004, and is expected to rise to 30% by 2013.
• The Department of Energy forecasts the amount of natural gas expected to be recovered could be sufficient to meet 90 years of demand based on consumption in 2010.
• For the first time in 15 years, U.S. production exceeds net imports of oil and gas.
• During the last three years, the U.S. not only reduced oil imports from OPEC countries by 20%, we are a net exporter of refined products like gasoline – the first time since the 1950’s.

See Chart below:

Innovation and applied technology are leveraging America out of our energy dependence and toward greater energy freedom. Investments in traditional energy related areas are no longer traditional – they are finding more oil and gas with greater recovery, precision, and doing it better.

That is what America is all about: leadership in a complex, confused and challenging world.

If you would like to discuss how we are capitalizing on this with investment strategies, feel free to get in touch!