As a young teen growing up in the early 1970s, I remember my parents’ complaints when gasoline went from 20 or 30 cents per gallon up to 40 to 50 cents – the horror! Sometimes there were long lines to get fuel because everyone wanted to keep their tank full because we might run out and supplies had to be rationed.
In 1978 gasoline prices went over $1, and none of the pumps were built to accommodate any price higher than 99.9 cents. So, they set the meter at half price, and doubled it when you went in to pay. Yes, this was before you could pay at the pump with a credit card.
I share these stories because they coincided with the growing fear at the time that the world’s oil supply would run out within the next decade or two, certainly by the year 2000. There’s always something to worry about, isn’t there? But, as we now know, 35 to 40 years later, we are not close to running out of oil, and in fact we appear to be finding new sources as technologies advance at an even higher rate.
The most exciting part is the recent projection by the International Energy Agency that the U.S. will likely be a larger producer of oil than Saudi Arabia by the year 2020 (visit this link for more information - http://money.cnn.com/2012/11/12/news/economy/us-oil-production-energy/ ).
In addition to crude oil, we are finding and beginning to use very cheap natural gas at a much higher rate, with the added benefit that burning natural gas to create electrical power and power commercial vehicle fleets is more environmentally friendly from an emissions standpoint. We have so much natural gas here in the U.S. that we will likely begin exporting it over the next 10 years. This will help to solve the trade imbalance problem that exists today.
I believe this is very exciting news for the potential economic growth over the next couple decades for a few reasons.
First, prices are more likely to stay low in an environment where we are less subject to the whims of politics terrorism if we need to buy much of our energy from abroad. Lower or slowly rising fuels costs keep inflation low and allow consumers to spend more money on other goods, providing a boost to economic growth.
Second, the move toward energy independence creates jobs here in this country, which boosts the economy and creates tax revenue from the wages of the workers here, rather than creating jobs and tax revenue in some other country.
Thirdly, when a population is more secure financially and emotionally, which I believe would be a result of energy independence, they will be more willing to commit capital for investment in the future, creating a renewed cycle of innovation and the life enhancements that flow from that creativity.
I believe we are already seeing some benefits of the move to energy independence here in the U.S., but there is likely a lot more to come in the next decade.
Tom Breiter is president of Breiter Capital Management, Inc., an Anna Maria based investment advisor. He can be reached at 778-1900. Some of the investment concepts highlighted in this column may carry the risk of loss of principal, and investors should determine appropriateness for their personal situation before investing. Visit www.breitercapital.com.