Investing in the U.S. Energy Revolution
By Art Steinmetz, President and Chief Investment Officer and Eliot Walsh, Senior Analyst
- Technological advances have made immense reserves of U.S. oil and natural gas economically recoverable
- Consumers and industry may see significant cost reductions, and America’s productivity and trade balance stand to improve
- A wide range of companies may encounter transformational growth opportunities
Until quite recently, the U.S.—the world’s largest energy consumer—faced what many believed to be an immutable and uncomfortable reality. With inadequate domestic supplies of accessible oil and natural gas, the U.S. would depend, indefinitely, on external sources for the lifeblood of its economy. This paradigm had deep economic, geopolitical and financial implications. For decades, it bore on national discussions over growth and deficits, alliances and war, and it influenced where energy-intensive industries built their plants—or shut them down.
Fast-forward to November 12, 2012, when the International Energy Agency announced to the surprise of many that U.S. oil production was poised to overtake that of Saudi Arabia within five to eight years. The agency reported that, thanks to a combination of increased production and energy efficiency, the U.S. could be “all but self-sufficient” in providing its energy needs within about two decades.1
The price of natural gas, meanwhile, had plummeted more than 70% over the previous four years, and a growing number of international industrial firms were breaking ground on multibillion-dollar plants in places like Pennsylvania, Iowa and Louisiana, for the sole reason that the raw materials and energy required to run their fertilizer manufactories and iron ore mills cost a quarter of what they did back home.
What happened? Technological advances have made immense reserves of domestic oil and natural gas economically recoverable. U.S. waters, for example, may be home to as much as a third of the world’s deepwater oil and gas resources,2 and improved drilling techniques and equipment have made it possible to recover hydrocarbons from reservoirs ever farther beneath the sea floor. Even more revolutionary, however, is the relatively new ability to access enormous deposits of hydrocarbons embedded in shale and similar geological formations deep underground. The upshot is that the U.S. is experiencing an energy revolution in which consumers and industry may see significant cost reductions, America’s productivity and trade balance stand to improve meaningfully, and a wide range of companies may encounter transformational growth opportunities.View Full Commentary
- International Energy Agency, World Energy Outlook 2012 Fact Sheet, November 12, 2012.
- Citigroup, Energy 2020: North America, the New Middle East? March 20, 2012.
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