It doesn’t take an international studies scholar to realize that the chaos level in the world is surging upwards. Sectarian violence in Iraq is on the rise once again. Syria is still mired in a bloody civil war with no end in sight. Russia continues to inflame tensions in Ukraine, even after its annexation of Crimea. And Israel and Hamas are once again clashing in Gaza.
For the most part, the US stock market has been fairly resilient, ignoring the rise in global unrest of late and trudging along without any major hiccups. Ultimately, there’s really no way to know whether the stock market would have performed better under more “normal” circumstances, especially given the improving labor market, strong corporate earnings, and encouraging industrial output numbers.
Longer term, however, the trend towards more global turbulence has made one thing crystal clear: The United States must achieve total energy independence. The fact that this is not a novel idea – yes, it’s been discussed during political campaigns and has served as the subject of countless articles and opinion pieces throughout the years – doesn’t make the pursuit of national energy independence any less of a strategic imperative.
The United States has always purchased its oil from countries with which we have, at best, a complicated relationship. Consider regimes such as Saudi Arabia. While the United States technically has a diplomatic relationship with the Saudis, they continue to tacitly (and sometimes, not so tacitly) support groups and policies that are hostile to Western culture in general and US interests in particular.
Such relationships could change. The United States will soon be the world’s largest oil producer, thanks to innovative new extraction technologies that have revitalized previously dormant wells and also led to a shale gas and oil boom that has galvanized into action a series of once sleepy communities across the upper Great Plains, Texas and beyond. Given such resources, we no longer have to fund our enemies.
The largest obstacle remains the existing infrastructure. It simply cannot support the current level output in terms of transporting, distributing and storing more oil and natural gas, and as such, it must be upgraded. What’s more, there has to be a more concentrated effort in tandem with any energy infrastructure overhaul to develop complementary renewable energy sources that have made great leaps forward in the technology needed to deliver on their promise, such as solar power.
As important as it is to produce our own energy, it is just as important to lessen the demand for fossil fuels and protect the environment. This can be done through energy conservation initiatives such as building a viable solar energy and electric car infrastructure. By lessening the demand for oil and at the same time increasing the supply of domestic oil, the United States can simultaneously weaken the regimes that rely on oil to fund their anti-American activities as well as lessen greenhouse gas emissions which are clearly beginning to effect climate change.
The good news is that the government seems to understand the stakes and is willing to support companies through a series of tax credits and other measures that could help the country achieve energy independence more quickly, while lessening the demand for fossil fuels. There are several companies that are poised to benefit from this trend.
**Energy Transfer Partners LP – It’s one thing to extract natural gas. It’s another to safely ship it and store it – which is where Energy Transfer Partners (ETP) comes in. With control of over 24,000 miles of pipelines – and plans to build more – in multiple energy producing states, including Texas, Louisiana and Mississippi, it has been one of the largest beneficiaries of new technologies that have unlocked natural gas from shale rock formations. With the infrastructure to support increased production currently woefully inadequate, this is one of the few companies that is capable of transporting natural gas and oil across state lines effectively.
**EOG Resources – There is perhaps no better pure play on growing domestic oil production than EOG Resources. It has emerged as one of the leaders in shale oil, having lease agreements in some of the most fertile areas across Texas and North Dakota. The company increased production significantly over the past year and recently posted impressive second-quarter numbers. EOG is the best pure play on American energy independence.
**Berkshire Hathaway – It’s a conglomerate, yes. But for investors looking for a diversified play on energy, Berkshire Hathaway is an attractive, outside-the-box oil and gas play, not only due to its extensive energy holdings but also because it wholly owns BNSF Railway, which will provide much needed transport capabilities as energy production ramps up even further. And because it’s so diversified and well managed, Berkshire Hathaway can be considered a safer play than some of the other companies mentioned above, which are concentrated in one industry.
**SolarCity – This company installs solar panels on rooftops, producing significantly lower monthly power bills for homeowners. It then returns the excess energy produced by each home back to the grid and is rewarded by the power companies, which provide Solar City with credits. It also has been an early mover in building electric car charging stations. While such vehicles currently represent a small sliver of the domestic car market, they are poised for a breakthrough as manufacturers are reportedly on the brink of introducing longer-range, more affordable models.
** Tesla Motors – Tesla is the most successful electric car company in the world. They are currently producing almost 40,000 high end Model S vehicles per year and growing. With new models and a cheaper Tesla on the horizon, along with the largest battery factory on the earth breaking ground, Tesla is poised to be the dominant electric car company for the next generation. Tesla is also building a charging station infrastructure and beginning to export cars all around the world.
Of course, upgrading the existing infrastructure and developing alternative forms of energy won’t be enough. In order to truly become energy independent, the United States must also continue to grow its economy and be a leader in clean energy innovation.
By developing our own sources of oil and adopting new technologies to lessen oil demand, it will be much easier to tell the rest of the world: We don’t need your oil any more – which will deprive hostile regimes the resources that all too often are turned around and deployed against us. It will also allow us to start to deal with the very important issue of climate change.
Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki, an independent investment advisory and wealth management firm with approximately $280 million in assets under advisement. Gerber Kawasaki clients and employees may own positions in various companies mentioned here. Please consult your advisor before making any investments.
Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor.