If you were to ask investors to name the biggest headwinds facing the markets, higher inflation and interest rates and their potentially negative impact on corporate earnings would top the list. Just about everyone on Wall Street agrees we are in a new era of higher levels of both. But this week’s guest believes there is another area that poses even greater challenges to the global economy and markets: energy.
Energy is under enormous pressure on numerous fronts: geopolitical, production, distribution, and financing. It’s a combination creating a new era of energy insecurity. Our guest is Tom Petrie, a long-time thought leader in the oil and gas industry. Since 2012 he has been Chairman of Petrie Partners, an influential investment banking and consulting boutique to the industry.
What is happening with U.S. energy independence? After decades of decline, U.S. oil production picked up significantly in the last decade and a half, largely thanks to the shale oil revolution, to the point where it surpassed Russia and Saudi Arabia’s output to become the world’s largest oil producer. Despite that achievement, Petrie says the U.S. and the rest of the world are now approaching a possible energy crisis caused by a number of factors. One of the biggest: some new geopolitical realities, what he calls geopolitical fragility. We will discuss them at length as well as why he believes the current elevated levels of oil prices are unsustainable and why the outperformance of traditional energy stocks is as well!
WEALTHTRACK Episode #1846 broadcast on May 13, 2022
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- Petrie Partners
MAKE SURE YOU HAVE SOME HEDGES AGAINST DISASTER
- For emergencies
- For periods of geopolitical unrest
- For episodes of market volatility
- Becoming more valuable as interest rates rise
- 3 month Treasury bills can be rolled over at higher yields when mature
- Simplest & most liquid vehicles
- SPDR Gold Shares ETF (GLD)
- Oldest & largest gold ETF
- Launched in 2004
- $70B in assets
- Expense ratio of 0.4%, or $40 for investment of $10,000
- Shares Gold Trust ETF (IAU)
- Launched in 2005
- $30B + in assets
- An expense ratio of 0.25%
Liquified natural gas (LNG): natural gas cooled to a liquid state of about -260° Fahrenheit, reducing its volume 600x
- Easier to transport & store than natural gas
- Plentiful supplies in the U.S. and other friendly countries
- Producers include Cheniere Energy (the largest U.S. producer of LNG)
Abby Joseph Cohen from the WEALTHTRACK Archives:
U.S. ENERGY INDEPENDENCE
U.S. energy independence is once again within reach if government policies support it. Energy thought leader Tom Petrie explains the key role the U.S. can play in building energy security for ourselves and the rest of the world.