Natural gas prices may remain at their present $4/mcf levels for 20 years, according to a recent IHS study, as an abundance of gas in North America powers the economy forward.
Demand, meanwhile, is not growing as fast as it once did. U.S. electricity demand is rising less than 1% per year, according to the Energy Information Agency, thanks to the cheapest form of renewable energy -- efficiency. Insulation, light emitting diodes (LEDs), more efficient electric motors in appliances and industry are all playing their part.
In other words, we are approaching an era of energy abundance, with supplies overtaking demand on several fronts, all at once. Anyone who is building a portfolio based on an assumption of high, rising energy prices, in my view, is making a mistake.
In this new energy world, the costs for all energy production are going to matter. The highest-cost supplies are going to be priced out of the market.
I don't think many portfolios are prepared for this. If natural gas remains at $4 per mcf, why should oil remain over $100 per barrel indefinitely? If renewable energy costs are continuing to decline, doesn't that mean oil companies have to look at the costs of development, not just at their proven reserves but the price of extraction?
What's happening in the energy market is not a secret to IBM. It's not a secret to the Department of Energy. Don't let it be a secret to you.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.