By Andrey Dashkov, analyst, Casey Research
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The United States, much like the rest of the world, is fighting an energy war.
Energy prices are soaring everywhere. In the U.S., gas prices hit $5 for the first time in history earlier in June. They could reach $6 per gallon on average by fall.
Meanwhile, in the U.K., gas prices hit $8.60 a gallon, and analysts predict they’ll continue soaring. Worldwide, energy prices are up over 70% compared to last year’s levels.
The war in Ukraine continues to impact the global supply and demand of oil, among other factors.
But there is one thing the U.S. has that a lot of nations don’t: energy security.
It doesn’t need to buy oil from other countries or sell it to survive.
That’s why there’s massive opportunity in this scenario.
So today, let’s take a closer look at how you can profit…
The U.S. Isn’t Oil-Dependent
Some economies, like Russia’s, are dependent on the price of oil. Oil and gas are responsible for about 60% of Russia’s exports and almost 40% of its budget revenue. In other words, oil and gas revenue is critical for Russia’s financial health.
In a bullish market, things go fairly well. Oil revenue finances government programs, and the national income grows.
When oil doesn’t perform so well, the country dips into recession. Back in 2014, after oil prices fell, the country’s currency lost 59% of its value in a matter of months, which prompted the Russian central bank to hike the country’s interest rate to 17%.
This leverage to the price of oil makes countries vulnerable.
The United States, on the other hand, isn’t oil-dependent.
It doesn’t need to buy oil from other countries to survive. In 2019, it became a net energy exporter, meaning that it sells more than it buys. In 2020 and 2021, the U.S. remained a net energy exporter.
The U.S. also doesn’t depend on oil exports, meaning that no single buyer can threaten the U.S. economy by refusing to buy its oil and gas.
This energy security will show this winter. Just watch the European Union and how it deals with the dwindling Russian supply of fossil fuels.
The EU, and Germany in particular, rely on Russian oil and gas – and that’s by choice. Short-sighted political decisions of the past will haunt those countries this fall.
Instead of building safe nuclear power plants and other clean energy sources to supply their economy, these countries are now dependent on Russia for their energy needs.
The U.S. Will Become a Global Energy Superpower
In the U.S., meanwhile, the renewable energy revolution is poised to proceed as planned.
In 2021, renewable sources were responsible for about 20% of renewable electricity generation. By 2030, that number will increase to almost one-half of the total.
In other words, not only does the U.S. win the oil war against Russia, which absolutely must sell its oil to sustain its economy, but the U.S. is also in the best position in the world to continue building out its clean energy infrastructure.
In my view, the U.S. is going to become a global energy superpower both in the short term and in the long term.
In the short term, it will demonstrate its strength through energy independence.
In the long term, it will become the preeminent clean energy economy.
Even oil companies realize that they want to be part of that trend.
They are launching venture-capital funds to invest in clean energy start-ups and renewable energy assets… They’re even building electric vehicle charging infrastructure. (Check out my colleague Dave Forest’s briefing on that right here.)
So the U.S. has the means to not only preserve its energy independence but also put billions of dollars into an economy powered by sustainable sources.
Here’s How to Play It
To participate in this trend, consider an ETF like the First Trust NASDAQ Clean Edge Green Energy ETF (QCLN).
It focuses on companies producing energy from renewable sources. Almost 70% of the companies it tracks are based in the U.S.
It’s an excellent way to play the U.S. energy dominance.
Good investing,
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Andrey Dashkov
Analyst, Casey Research