Have you noticed the price at the pump lately? The cost of gas has gone down and we very well could be at an energy cost plateau for some time. This stability in energy prices removes one of the many potential shocks that can combat the economic system.
According to the Energy Information Administration, the United States will consume total of 7 billion barrels a year (22 Million barrels a day) -- about 22% of total world petroleum consumption -- in 2013. An analyst that I spoke with recently, who has spent his entire career of over 40 years in the energy space, believes that America could be energy independent by 2020 and prices could remain fairly stable until 2040. But there are so many moving parts it’s really too difficult to tell exactly.
On the supply side of the equation, at current market prices the US (in blue below) has just become the second largest global producer surpassing Russia (tracked in brown) for total liquid fuel production in the world.
Consider some other positive outcomes:
- Chemical plants are being built in the US again for the first time in 25 years because of oil shale. They are building them with cheap financing, cheap energy and cheap labor right near the shale. US Chemical companies are the low cost producers in the world now.
- The International Energy Agency said recently that the US is on track to becoming the leading global producer within the next decade.
- Demand has waned as well due to higher prices and efficiencies as people grow more conscientious.
- The best outcome of all would be if the US becomes less dependent on OPEC and their “Oil Weapon” which has been dangled ominously over us for 3 decades. We very well could be in greater control of our supply shocks for a decade or two, maybe much longer if we use this time to develop alternative energy sources that could sustain us after the shale runs out.
Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.
Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.
The information contained in this report does not purport to be a complete description of the markets or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of Raymond James. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors.