US Energy Independence!

I first learned that the US has the potential to achieve energy independence several months ago in a discussion I had with analyst’s working at Reaves Asset Management. Subsequently, U.S. energy independence emerged as a topic in the presidential election – with both Romney and Obama embracing the concept. If indeed this is realized, this will undoubtedly have a large impact on the global economy over the coming decades. Recently, Raymond James published an analysis predicting that domestic American oil production would rise from 5.6 million barrels a day to 9.1 million by 2015. This means that US production, as a percentage of total US consumption, will jump from approximately 30% to around 50% of our 19.2 million barrel/day habit. This has huge implications. The value of 3.5 million barrels/day works out to $115 billion a year at current prices (3.5 million X 365 X $90). This drop in imports will lower America's trade deficit by 20 – 25% over the next three years. Further, these 3.5 million barrels have the potential to offset a lot of the world's oil demand growth over the next three years. I will say it again – this is a hugely positive development for the US. Concerns about war with Iran, inflamed by elections in both countries, have taken the price of a barrel up from $75 in the fall; the general consensus is that the “fear premium” has added $30-$40 to the price of crude. The potential for weaker economic conditions in the US and abroad can reduce demand. A massive joint venture (2.8 megawatt) solar plant, planned for the CA desert, is forecast to generate enough electricity for 2 million homes – enough to cover about 15% of the total demand in California. (Solar Trust of America is a joint venture between two European companies and is projected to qualify for $900 million in cash grants and loan guarantees from the Department of Energy.) There is an additional solar facility coming on line in New Mexico – the Tres Amigas. As demand declines, supply increases and the “fear premium” subsides – expect to see even lower oil prices in the US. Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.