P.S. My colleague Adam O’Dell is also bullish on U.S. fossil fuel companies over the next several years — even if the White House and Wall Street wants you to think the opposite.
In case you missed it, earlier this month scientists at the Lawrence Livermore National Laboratory in California made history.
They successfully executed a nuclear fusion reaction — combining two hydrogen atoms into a helium atom — that produced a net energy gain.
This is the proverbial holy grail of energy production. Traditional oil-and-gas-powered energy creates greenhouse gas emissions. Solar and wind energy require expensive battery storage to be viable. Nuclear fission reactors — the technology that powers current nuclear energy — creates toxic nuclear waste. And even hydroelectric energy requires building dams that disrupt the natural environment.
There’s no “perfect” way to generate electricity that doesn’t have some pretty nasty unintended consequences. Until now.
Nuclear fusion is potentially unlimited clean energy, emitting not much more than helium, using the same reaction that powers the sun. This is the stuff of Star Trek.
There’s just one problem… We may very well be dead by the time it’s commercially viable.
The scientists were able to generate enough energy to boil a few pots of water. It will likely be decades before they are able to produce fusion reactions at a scale large enough to power a plant, let alone the hundreds or thousands of plants that would be necessary to power the country.
So, exciting as nuclear fusion technology is, it’s VERY early days. So early, it’s not even investable.
We’re going to be stuck with existing technology for a while. And that means continued dependence on oil and gas.
And about that…
We have data on investments in oil and gas infrastructure going through the end of last year. It’s not pretty.
Hundreds of billions of dollars was invested in American energy infrastructure between 2000 and 2014. Unfortunately, it worked a little too well. The United States went from being a chronic net importer of crude oil to the world’s largest producer and a net exporter.
The resulting flood of crude oil caused prices to plummet … leading to a nasty bear market in energy. It made no economic sense to invest in new production capacity when the market was already awash in too much inventory, so investment dropped to levels first seen in 2005.
As investors who are bullish on energy stocks, though, this is exactly what we want to see. A lack of investment in the sector helped to stabilize prices and lay the groundwork for the next bull market in energy.
With monetary conditions tight these days, we probably don’t have to worry about excessive investment in oil and gas any time soon. That should keep margins high and allow the major players here to enjoy several years of bumper profits.
It’s yet another tailwind for the energy industry, and the top-quality stocks in that industry that are poised to lead the market in the years ahead.
Adam O’Dell has been on top of this story for months, and just recently put the finishing touches on a full presentation that details the whole story.
Even better … Adam’s set his sights on a best-of-breed energy company that he believes could run 100% or more in 100 days or less.
