Last November, the International Energy Agency (IEA) released stunning new predictions about the world energy outlook that many of us who grew up during the 1970s oil shock could scarcely believe:
“The United States will overtake Saudi Arabia as the world’s leading oil producer by about 2017. The United States (is predicted to) overtake Russia as the leading producer of natural gas in 2015.” New York Times
“Politicians have been warning for decades that the U.S. must wean itself from foreign energy, but just a few years ago their words seemed like so much wishful thinking. But in a turnaround that industry insiders describe as nothing short of amazing, the picture has drastically changed.” CNBC
“The major factor driving domestic production higher is a newfound ability to squeeze oil out of rock once thought too difficult and expensive to tap. Drillers have learned to drill horizontally into long, thin seams of shale and other rock that holds oil, instead of searching for rare underground pools of hydrocarbons that have accumulated over millions of years.” CBS News
“The shale revolution redraws the global energy landscape.” Financial Times
It’s been several months since the IEA released its world energy report, but the future is indeed looking brighter for the U.S. While the jury is still out, some economists are now pointing to the U.S.A.’s new homegrown energy resurgence as the catalyst for a new “American industrial renaissance.”
We’ll talk more about this (and how it impacts your investing strategy) in future blog posts, but here’s a quick and upbeat summary from investment strategist Richard Bernstein, founder and CEO of Richard Bernstein Advisors LLC.
- The U.S. will supplant Saudi Arabia and Russia as the world’s largest energy producer by 2017, according to the International Energy Agency (IEA).
- That puts the U.S. on the road to energy independence.
- Low energy costs in the U.S. (especially natural gas and gasoline) are reducing the costs of domestic production in many industries.
- The U.S., outside of the Middle East, has some of the cheapest gas prices in the world.
- U.S. labor costs are becoming more competitive with countries like China, as wage inflation has pushed up wages overseas.
- “Today’s lower U.S. labor costs combined with lower energy, distribution and transportation costs are making U.S. domestically focused industrials more competitive,” says Bernstein.
- As a result, the trend toward outsourcing production may reverse itself and lead to “insourcing.”
- In short, the U.S. is “back in business.”