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Why Investors are Spending Big on the US Oil and Gas Boom

Cody Davis
Contributor: Cody Davis
Posted: 10/09/2013

Population Growth, Higher Fuel Demands and Future Energy Forecasts

The world’s population is expected to increase by more than 25 percent from 2010 to 2040 and reach nearly 9 billion people. During this timeframe, global electricity demand is expected to grow by 85 percent.

Total transportation demand is also projected to increase by over 40 percent in 2040, with growth stemming almost entirely from the expanding commercial transportation sector.

Fortunately, oil and gas technology is enabling the safe development of once hard-to-produce energy resources, and allowing producers to expand available fuel supplies to meet the world’s growing energy needs.

Although the use of nuclear power and renewable energy resources will grow in the upcoming decades - and energy-saving practices and technologies will become increasingly vital - oil is expected to remain the primary global fuel through 2040.

Furthermore, natural gas will become the fastest growing major fuel, and will displace coal as the second most widely used fuel resource on the planet.

The Investment Heroes

Considering the scale of these demands and the economic successes of the shale oil and gas boom in the United States, it’s no surprise that energy companies across the globe are making extensive investments in America's energy industry.

In fact, eight out of the top 25 investors in 2013 were energy companies according to the Progressive Policy Institute’s U.S. Investment Heroes report.

These companies invested more than $56 billion over the last year in plants, property and equipment in the United States, and accounted for almost 40 percent of the $150 billion invested by the top 25 investment heroes of 2013.

An Economic Bright Spot

Despite the economic uncertainty surrounding other industries, energy production remains a bright spot for U.S. business investment.

According to new data from the Energy Information Administration, in June the United States lead the world for the eighth strait month in total petroleum production.

Moreover, America "produced more petroleum products in June than the combined petroleum output of all the countries in Europe, Central America, and South America," according to Dr. Mark Perry.



The exponential increase in domestic oil production is reducing U.S. reliance on foreign oil supplies, lowering oil import levels and boosting petroleum exports.

New data from the Commerce department found that in July petroleum exports hit a fresh record high of $12.5 billion in seasonally adjusted dollars – an increase of 26 percent compared to the previous year and 1,160 percent higher than a decade ago.

As a result, the oil trade deficit is less than half of what it was during the price spike in the summer of 2008. Furthermore, July imports from OPEC nations were 28 percent lower than mid-2011 levels and 54% down from levels recorded roughly five years ago.

READ MORE: How Higher Energy Taxes Threaten US Shale Boom & Economy

Betting on U.S. LNG Exports

Fracking and the shale boom are also opening up new opportunities surrounding natural gas exports. To date, however, only four companies have been approved to sell LNG overseas.

Nevertheless, energy producers are ramping up their efforts and creating LNG facilities. These companies are expecting the Energy Department will ultimately determine that natural gas exports will serve the public’s interests.

For instance, Chevron, ExxonMobil, Royal Dutch Shell and Total are planning to invest up to $400 billion in LNG investments across the globe.

Many argue that LNG will inevitably be exported but are unsure of the impact those exports will have on global markets. Today, global annual consumption is about 240 million tons, but some analysts predict that demand will more than double to 550 million tons per year by 2030.

If all of the proposed plants are approved and built, the United States could supply roughly 200 million tons of LNG– almost half of the projected global demand.

READ MORE: Upward Income Mobility & Shale Production: A Causal Connection?

A Prosperous Energy Future

Considering the essential role energy development plays on job creation and the economy, it’s no wonder that investors are spending big on the U.S. oil and gas boom.

North America oil and gas discoveries account for roughly 7.6 percent of the world’s untapped potential reserves, and are worth an estimated $132 billion at current market prices.

The United States is already on pace to overtake Russia as the leading global oil and gas producer. Furthermore, energy experts are expecting LNG exports to create an economic boom in the second half of this decade.

Although it is unlikely that the boom in domestic production will help the United States become a fully independent energy nation, the economic gains being created by the oil and gas industry may help the U.S. once again become a revered superpower.

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Cody Davis
Contributor: Cody Davis
Posted: 10/09/2013