For almost four decades, since the 1973-74 oil embargo, America has been struggling with energy supplies and the need to keep its economy powered by hydrocarbons. Various plans have failed to solve the problem, from CAFE standards to biofuels to electric cars and more. Yet, America stands on the verge of a major change that puts it on a course to near self-sufficiency, according to a past President of OPEC as well as Citi’s head of commodities research, Ed Morse. The Gulf of Mexico is expected to see production climb from 1.55 million barrels per day (mbd) of oil to 4.0 mbd by the end of the decade, while shale (or more correctly “tight”) oil could add another 2.0 mbd, while a shift to natural gas for heavy trucks could save the country from using another 0.5 mbd. In addition, auto efficiencies and a few other factors also may help. Overall, US imports of oil should drop from 9.0 mbd to 2.0 mbd, which easily can be purchased from Canada and Mexico. Keep in mind that 7.0 mbd would equal $700 million daily and more than $250 billion annually. The implications are simply stunning on America’s current account figures, trade balances and even potentially the positioning (and cost) of US military forces around the world. The increase in production of shale gas could also add millions of new jobs.
The above is a reprinted excerpt from the 12/14/11 Citi North America Equity Strategy Newsletter
Posted by Dave Hogg