I read a fair amount of research on a broad range of topics and indeed, pay for several research services. They certainly help guide portfolio construction.

One that caught my attention recently concerned oil and natural gas – what to expect in the coming years and the implications. I believe this might help as you think about how to position your company. As an executive summary, consider these points:

• Though the very near-term price of oil may be a function of the US and Chinese economic growth rates, the longer-term trend is toward the Saudi government budget “breakeven” price of $105/barrel. Somewhere between $105 and $120/barrel seems to be the range.
• Natural gas in the US will remain “bargain priced” relative to oil and the rest of the world given our shale-based production. In general, shale oil depletes fairly fast, natural gas is much longer-lived production.
• Oil is primarily a transportation fuel, though a wide range of other products are based on petrochemical feedstocks. Both need to be considered.
• Natural gas is primarily used to generate electricity and heating/cooling. It is also used as a petrochemical feedstock, primarily large volume plastics and fertilizer. AI should be a boost.
• The issue is the supply side of the equation. OPEC has not substantially increased their capacity and non-OPEC sources even less so.
• Inventory cushions - both commercial and “strategic reserves” - have been drawn down a lot in the last two years.
• Demand has grown steadily, even in the context of “green energy” growth. Emerging markets are the big factor here and will continue to be.
• Our elections will not alter these fundamental factors.
• Net, the bias to the price of oil: transportation is up. Less so for natural gas: electricity/heating and cooling. Politics are in the way of permitting right now…

Let me know if you would like to discuss.