The Great Energy Squeeze of 2010

Posted by www.uncommonwisdomdaily.com
by Sean Brodrick on February 26, 2010 at 8:30 am

We’re early in the year, and already energy prices are zigzagging higher. The culprit? China, which is using more energy of all types. Meanwhile, production is falling, and tanker storage is falling, setting us up for a good ol’ fashioned squeeze in energy prices.

The good news is that the solution to this looming problem is also a good choice for investors — I’m talking about alternative or “green” energy. And in fact, I have a NEW pick in the green energy space.

More on that in a bit. First, here’s the latest news — just some of the things I’m watching now.

China — The Thirsty Tiger. China is the world’s second-biggest energy consumer (the U.S. is #1), and it’s getting more thirsty by the minute. China processed 29% more crude oil in January than a year earlier, according to the China Petroleum & Chemical Association. China’s economy is back in boom mode. The Chinese economy expanded at the fastest pace in the fourth quarter since 2007, and will grow four times faster than the U.S. in 2010.

China imported more than half its crude oil last year. This year, China’s crude oil imports may hit an all-time high, according to China National Petroleum Corp. By 2015, it could be importing 11.5 million barrels a day — nearly three times the record 4 million barrels a day it imported in January.

The Rest of the Developing World Is Racing to Catch Up. Emerging economies account for 47% of global oil demand in 2010, up from 37% in 2000, according to the International Energy Agency. This is lighting a fire under green energy projects.

The IEA expects consumers globally, especially the Chinese, to burn more crude oil this year than previously forecast.

So no wonder that the International Energy Agency said it expects consumers globally — led by China — to burn more crude oil this year than previously forecast. The IEA expects world oil demand to average 86.5 million barrels a day in 2010, an increase of 170,000 from its January report and growth of 1.8% from 2009. And ALL of the increase in consumption comes from emerging markets.

Saudi Arabia Shifts East. The U.S. has always been Saudi Arabia’s most important customer. But that relationship is being redefined, as Saudi Arabia sees the enormous potential in China and shifts its eyes to the East. Result: Saudi Arabia is boosting its exports to China even as its exports to the U.S. fell below 1 million barrels a day last year to hit a 22-year-low.

Supply Is Coming Under Terrible Pressure. The one-two of a financial crisis and global recession torpedoed a lot of new oil projects, and the number of oil and gas rigs hit a 6-year-low in May. Rising oil prices have since sent the number of rigs in service up by 40%, according to data from Baker Hughes. That sounds great, but if you were an oil driller, would you want to make long-term plans under such wild market conditions? Many can’t — or won’t.

And then there’s the inescapable math of oil field depletion. From 2011 on, the relentless drop in global oil production from existing fields will be barely balanced by new projects. We’ll see a drop of just over 4 million barrels per day from the fields that are currently producing about 85 million barrels a day. After 2014, world production will go into steeper and steeper decline. While the world sleeps, the oil sheiks are counting down to doomsday.

It’s Not Just Oil — It’s All Energy Types. China is the world’s biggest coal user, and it imported 16.4 million metric tonnes in December, customs data shows. That’s a six-fold increase from a year earlier. And this has caused some analysts to raise their coal price estimates to $70 a tonne this year. It was just $50 a tonne recently.

If coal prices spike, that means we’ll face energy squeezes on two fronts. Higher coal prices will raise the cost of electricity used to light and heat our homes and workplaces. And higher oil prices will hit you in the wallet every time you pull up to the gas pump. It all has the potential to add up to the Great Energy Squeeze of 2010!

Don’t you hate it when we get squeezed by China and snubbed by Saudi Arabia? Don’t you wish there was something you could do about it? Well, now there IS something you can do: Turn green. Alternative energy gives you the opportunity to do something about America’s dependence on foreign oil and potentially reap a handsome profit at the same time.

Green Energy Solutions on the Road and at Home

In my Golden Age of Green Energy Report, I talk about an alternative fuel we have for cars now that works. Electric cars may be the solution some day, but right now, there are more and more cars hitting the road powered by another “alternative” — natural gas. And I name my best pick in this field — one that could really take off.

It’s just one of eight red-hot picks in the report — picks ranging from wind to solar to nuclear and more.

If you invest in alternative energy, you MUST be careful. Let me show you why …

China Is Rewriting the Rules of the Game

You might think wind power is a great place to invest, and you’d be right. Wind capacity in the United States has tripled and is enough to meet U.S. electricity consumption, according to the Department of Energy.

But you’d also be wrong — because the boys in Beijing just handed down a new edict effectively shutting out international wind power developers from building offshore wind farms in China. The Global Wind Energy Council calls the new regulations “shocking.”

Wind capacity in the United States has tripled and is enough to meet U.S. electricity consumption.

They shouldn’t be shocked — China never plays fair. This is bad news for European and some American wind power makers, and great news for Chinese wind power manufacturers.

Guess what kind of wind company I recommended in my Golden Age of Green Energy Report? It’s a trick question — I recommended a company that makes the equipment that wind farms use, and it sells to BOTH sides in China’s war over wind!

That’s because I think it’s just smart, when possible, to invest in companies that have an edge on the competition and a “moat” around their business.

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