This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Our Ingenuity Makes the Saudi Oil Prices Nervous

By Lewis J. Walker

NEW YORK (AdviceIQ) -- The irony is great. The United States, once a beggar to foreign oil producers, is now a big energy exporter. Even better, this trend is just getting started and it's thanks to good old American ingenuity.

The Saudi princes are nervous: 92% of Saudi Arabias annual budget depends on oil sales. The fear is that the energy boom in the U.S. and elsewhere, driven by improved seismic technology, horizontal drilling and fracking techniques, will diminish sales and the Organization of Petroleum Exporting Countries' dominance of global oil prices.

Horizontal drilling involves boring a well vertically from the surface to an underground oil or gas deposit reservoir and shifting the drill sideways to increase access to the formation. This allows greater production from a single well. While the concept is not new, it was only in the 1980s that the technique became commercially viable.

Hydraulic fracturing, or fracking, is a process that injects water, sand and sometimes chemicals into a wellbore under high pressure to create fractures in rock or shale, allowing oil or gas to flow. Fracking techniques advanced in the late 1990s and into the 2000s, and combined with improved vertical and horizontal drilling techniques, created a renaissance in energy production. Drilling prospects that were not viable before suddenly were. Witness the boom in North Dakota, Texas and parts of Canada.

The Financial Times opined that U.S. oil imports will fall to a 25-year low next year as domestic production increases and demand grows slowly. As America becomes more energy self-sufficient with reduced imports, we will see a major global geopolitical shift.

The surge in domestic supply has meant U.S. oil is cheaper than that produced overseas. In mid-December, Bloomberg reported oil futures at $109 per barrel for Brent crude -- which basically tracks North Sea-produced petroleum -- and $98 for West Texas Intermediate light sweet crude oil.

Clean-burning natural gas has environmental appeal compared with coal. The use of natural gas as a fuel in transportation fleets is growing. The Department of Energy has approved construction of liquefied natural gas shipping facilities, positioning the U.S. as a net exporter of natural gas.

The success in North Dakotas Bakken Shale and Eagle Ford Shale in Texas has spurred the development of pipelines, processing facilities and other energy infrastructure. This boosts jobs, investment and other economic activity that accelerates our economic recovery. Natural gas prices overseas are higher than in the U.S. Boosting exports could cause our prices to increase as prices move toward parity, but that will also spur greater production.

Drilling activity is picking up in the Gulf Coast states and in south central U.S. Canada has vast untapped shale reserves. Mexico also has significant shale deposits. Asian markets are eager for surplus North American gas. All of this potential may diminish the power of Russia and unstable Middle Eastern states as energy suppliers.

Over the next five to six years, as technology advances further, the shale boom is likely to spread to China, Ukraine, Argentina, Australia and Algeria, expanding oil and gas supplies and restraining prices that often jump in the face of Middle Eastern turmoil. China is eager for gas production to offset the use of coal in power plants.

Reuters reported recently that China will replace four coal-burning power plants in pollution-plagued Beijing with natural gas-fired facilities in an effort to clean the capitals notoriously dirty air. Smog has deterred tourism and international business executives have spurned relocation to Beijing and other cities in China based on growing reports of choking pollution.

Dirty coal produces about 70% of Chinas power. The goal is to cut coal burning to below 65% by 2017 in the face of rising health problems from harmful particulates and citizen protests over all forms of air, water and soil pollution.

Dependable and potentially lower-cost energy supplies increases Americas appeal as a manufacturing and distribution hub, while expanding jobs and investment opportunities. We are a long way from the dour forecasts of recent ilk. Good news all around.

-- By Lewis J. Walker, CFP, president of Walker Capital Management and Walker Capital Advisory Services in Norcross, Ga., a registered investment adviser in securities and certain advisory services offered through the Strategic Financial Alliance. Walker is a registered representative of SFA, which is otherwise unaffiliated with Walker Capital. 770-441-2603. lewisw@theinvestmentcoach.com .

AdviceIQ is a network of financial advisers that writes insightful articles for the public about investing and wealth management. All articles are edited by AdviceIQ's editor in chief, Larry Light. AdviceIQ certifies that all its advisers have no regulatory infractions.

AdviceIQ is a network of financial advisors that writes insightful articles for the public about investing and wealth management. All articles are edited by AdviceIQ's editor in chief, Larry Light. AdviceIQ certifies that all its advisors have no regulatory infractions.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,074.67 +130.86 0.77%
S&P 500 1,977.59 +10.02 0.51%
NASDAQ 4,436.0720 +20.5820 0.47%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs