Backing an Energy Transition
Editor Keith Kohl takes a look at why today's declining oil imports may be due to one very large oil field in North Dakota...

This Article Originally was Published here: http://www.energyandcapital.com/articles/backing-an-energy-transition/2851

"Our neck is stretched over the fence and OPEC has a knife."

That was one of President Carter's ominous warnings in his "Crisis of Confidence" speech, delivered in July 1979.

Here we are 33 years later, and things haven't changed much.

Carter had also set a goal of never again importing more foreign oil than we did in 1977 — a pledge that lasted nearly fifteen years... until imports rose to 6.7 million barrels per day in 1993.

To be fair, Jimmy had a little help from the Prudhoe Bay oil field in Alaska...

Which is why his promise was broken just five years after crude production peaked in the North Slope (click chart to enlarge):

North Slope 11-30

Although one of the main drivers behind lowering foreign crude oil imports was the added barrels from Prudhoe Bay, we have to give Carter credit; U.S. oil demand did decline slightly during his time in the White House.

We're seeing a similar story play out today... only it's not Alaska that's helping boost our domestic production, but places like North Dakota and Texas.

Unfortunately, somewhere along the line our government came up with a different solution to our energy crisis: It decided to start throwing money against the renewable wall and hope something sticks.

It hasn't — and we still haven't managed to address the real issue at hand.

Nobody wants to be the Grinch this time of year, but given the choice between a realistic transition away from oil (that will also pay off huge for early investors) and an energy sector that would collapse without billions of taxpayer dollars, I prefer the former.

Last year, Uncle Sam dished out a cool $24 billion in energy subsidies. As we learned during the presidential debates in October, fossil fuels received about $2.5 billion dollars. As for renewables? Those subsidies came with a price tag of roughly $16 billion.

If only there were a cheaper, cleaner alternative to oil that didn't call for billions of dollars of taxpayer money...

Oh, wait.

Taking the Knife Back

President Carter got one part right: Our dependence on OPEC oil is our greatest vice.

As my colleague Brianna Panzica pointed out recently, we keep putting our trust in OPEC, year after year — despite the complicated and often threatening relationship we have with the Middle East.

And while our largest source of oil may be our friendly neighbors to the north, the fact remains we're still importing more than four million barrels per day from OPEC member countries — a little over 47% our total crude imports.

So some things haven't changed since Carter's speech.

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But the real devil is in the details, because four of our five largest suppliers are having troubles of their own...

Are things getting better? Absolutely. Between 2005 and 2011, our dependence on all foreign oil sources decreased by 12% — and they're even lower today.

Still, despite the 18.8 million barrels of petroleum products we consumed last year, even the most die-hard oil investing enthusiasts agree that moving away from petroleum is an inevitability. We can argue on when the oil age will come to an end, but rest assured it'll happen eventually.

And making even the slightest dent in our oil consumption habits won't come from the renewable sector.

We're already seeing signs of the upcoming transition. The news may not dominate media headlines, but these press releases do pop up now and again...

Perhaps it's a company announcing they're converting their fleet of trucks from diesel to natural gas.

According to the Department of Energy, the average price for a gallon of diesel rose past $4/gallon this week — a cost truckers can cut in half by switching to natural gas.

The only thing holding back a natural gas revolution in the transportation sector is a classic energy catch-22: In order for automakers to put more natural gas vehicles on the road, they need to see more fuel stations, but before we see more fueling stations, there needs to be more vehicles on the road.

It will be a slow process, but it's already taking shape.

And most important: This conversion will take place without as much as a single penny from Uncle Sam.

The smart money is preparing for this natural gas takeover now — and this is what they're buying.

The best part is the transportation transformation will turn you a profit no matter how low natural gas prices fall.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.

This Article Originally was Published here: http://www.energyandcapital.com/articles/backing-an-energy-transition/2851



Backing an Energy Transition originally appeared in Energy and Capital. Energy and Capital, a free daily newsletter, offers practical investment analysis in the new energy economy.
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