In August 1990, President Bush ordered American soldiers to Saudi Arabia to deter the military takeover by Iraq of the world’s major oil exporter. As Americans sat transfixed to their televisions, the price of oil on the international market surged upwards. Gasoline prices in the U.S. soon followed. As the troops shipped out, the popular press rediscovered U.S. dependence on foreign petroleum and our resulting economic vulnerability.
During the 1970s, the American public and physicists, in particular, were bombarded by information on energy technologies, supplies, and use. The high price of oil brought about by the actions of OPEC (Organizations of Petroleum Exporting Countries) nations shocked the country into an awareness of coming shortages of fossil fuels. You might still remember seeing on television the long lines in the major cities for gasoline, particularly in Los Angeles, where cars are deeply rooted in the culture. Federal agencies and state governments financed a number of crash programs to develop energy sources and new fossil fuel development. Not much has changed in 20 years; except, of course, our growing dependence on fossil fuels.
Prior to Iraq’s invasion of Kuwait, the price of oil on the international market had dropped dramatically and the energy crisis seemed to have disappeared from public consciousness. Certainly the food of information on new energy technologies and new fuel sources, alternative and traditional, crossing the desk of nonspecialists has decreased to a trickle. Funding for energy research has also declined dramatically, along with tax incentives for energy conservation measures and the development of new energy sources.
At the same time, the public has been growing increasingly aware of the social and economic costs of unrestrained energy se. The recent rash of well-publicized oil spills and their environmental effects has raised public consciousness of the dangers of petroleum production and use. Yet oil consumption is on the rise, and the U.S. now imports at least half of the petroleum it uses. The spiraling national trade deficit raises concerns over the expense of importing large amounts of oil. The military crisis in Saudi Arabia has underscored how politically vulnerable our foreign sources of petroleum are.
So what opportunities exist in the energy sector for the astute investor? Let’s explore some interesting global developments.
While the reentry of Iraq into the oil market may put some downward pressure on oil prices, the long-term trend is up at least through the next decade, Many experts are anticipating a synchronized recovery in the industrialized nations in 1997; many also believe that the emerging nations will grow tat more than twice the rate of the developed countries for the foreseeable future. As developed countries enter a period of economic growth, demand for energy from both consumers and commercial users increases. Rom the increased use of our automobiles to massive production increases b industry fueled by new consumer spending, the demand for oil and its by-products could begin to rise rapidly.
The average American uses eight times as much energy as an average person anywhere else in the world. For example, there are 50 million more automobiles on the roads today versus 20 years ago. Also, today many people are driving gas-guzzling vans or trucks.
In less developed countries, like Asia, such demographic shifts as major population movements from the country to the city are placing increased demand on energy supplies. Additionally, the huge growth in aviation in this region will drive energy demand to record highs. Engineering and construction companies and power equipment suppliers are in a position to benefit from the need for additional refinery and power-plant capacity, and the potential exists for a classic energy construction cycle to develop over the next 5 to 10 years.