On June 6, 2022, President Biden invoked the Defense Production Act to “accelerate domestic production of clean energy technologies, including solar panel parts.” If you saw this as a signal to go all-in on renewable energy stocks, I can’t say I’d blame you.The government is getting behind renewable energy in such a big way, Biden used a presidential power typically reserved for emergencies. It seems like a no-brainer. While you may one day be right on that call, right now you’re missing a far easier, potentially far more lucrative trade setup. Honestly, this move by Biden only serves as a distraction to the real energy story of the year … and, in my opinion, the rest of this decade… Oil. No matter what the White House does or says, I believe oil stocks will massively outperform the S&P 500 both next year and for the rest of the 2020s… Very few people understand or see this coming… Let’s get into why a massive oil bull market is taking shape right before our eyes…
Oil’s 2 Big Tailwinds
The energy sector has been on fire all year, and there are two key reasons why:
- The Russian invasion of Ukraine in February led the international community to sanction Russian oil and gas exports. Those sanctions threatened global supply, and this pushed oil and gas prices through the roof.
- We’re using more oil at home. During the COVID lockdowns in 2020, oil demand dropped sharply because so few people were driving. Now, people are out and about … and the demand for gasoline continues to rise.
Oil and gas companies have been the biggest beneficiaries of these events in 2022:
This chart compares the Energy Select Sector SPDR Fund (NYSE: XLE), an exchange-traded fund tracking energy stocks, to the S&P 500 (red). As you can see, XLE is up 53.9% over the last 12 months, while the broader market is down 16.5%.The energy sector may have pulled back a bit in recent weeks, but the bullish trend in energy stocks has most certainly not run its course… Global oil demand will continue to rise in the coming years. And as our demand for oil continues to rise, while the supply side remains tight thanks to years of underinvestment … prices will rise.
Oil Demand Isn’t Slowing Down
With a growing world population, oil demand will only keep increasing.the most popular choice for fuel and transportation, but it’s also widely used for thousands of everyday items such as plastics, textiles, cosmetics and lubricants. (Remember, these products aren’t just used by households, but factories and businesses as well.) So as populations around the world grow, economies require more oil to keep things running smoothly. Demand for oil will increase further.The Organization of Petroleum Exporting Countries (OPEC) is actually projecting the demand for oil to reach record highs in the near future:Not only does oil remain
As you can see in the chart above, the demand for oil from OPEC nations could reach 12 million barrels per day by 2045. And that’s just oil from OPEC. The International Energy Agency (IEA) projects that total global oil demand will climb to 105.4 million barrels per day by 2030. That’s an increase of 100,000 barrels of oil per day from last year. China, alone, will consume 15.7 million barrels per day by 2030. And with China right in the middle of easing its draconian lockdown restrictions, oil demand from its 1.4 billion citizens is set to surge. Alongside this growing demand is the need for countries to replace depleting oil reserves. As Mike Carr showed you Thursday, the Biden Administration took 180 million barrels of oil out of the Strategic Petroleum Reserves this year alone to bring down gas prices. Those reserves must be replaced … by law. Twenty-nine other countries committed to tapping oil reserves to compensate for what was lost due to sanctions on Russian oil exports. So, you have 30 counties that need to replace their oil reserves … and increased demand for oil outside of that replacement. It all spells a strong rise in oil prices through 2030. So, where can you find the best energy stocks to benefit? You won’t have to search far…
USA: The World’s New Oil Marketplace
The United States — yes, the same country currently using emergency powers to produce solar panels —is rapidly becoming the new center of the global oil market. We were once a customer of OPEC oil … Now, we’re turning into a rival.The IEA projects the U.S. will account for 85% of the growth in oil production worldwide by 2030 as we tap into unmined shale oil formations. By 2025, the U.S. is set to produce 20.9 million barrels of oil a day. By then, combined exports of crude and refined oil will overtake those of Saudi Arabia. OPEC controls over half the global supply of oil now. That will shrink to 47% by 2025, the lowest since the 1980s. If you’re looking for steady, reliable returns, U.S. oil stocks could prove to be a lucrative choice. Many oil stocks have seen incredible growth over the past year due to higher energy demands and increased efficiency of oil production. So make sure to check out The Oil Super Bull Summit at 4 p.m., December 28. Because during this special event, I’ll give you the details on my No. 1 oil stock for 2023. I believe this company has the power to hit 100% gains in the next 100 days. If that sounds unbelievable to you, I encourage you to join me on December 28. With everything I know about this company, PLUS the convergence of factors we’re seeing today in the oil markets… I’m confident that, in hindsight, this will be one of the biggest no-brainer trades in market history.Sign up now so you don’t miss it!To good profits,Adam O’DellChief Investment Strategist, Money & Markets