If you only read mainstream news, you probably think that crude oil consumption is falling and that fossil fuels will soon be replaced as an energy source by renewable sources and natural gas. That assumption is far from reality.Let’s start with global crude oil consumption.
A decade ago, the planet consumed 83.65 million barrels of oil per day (the “per-day” part always astonishes me). For 2024, that number is 104.46 million barrels per day. The International Energy Agency (IEA) forecasts that oil demand will grow by 1.1 million barrels per day in 2025. From my experience, the IEA always guesses low.Human civilization runs on oil and will continue to do so for the foreseeable future.You may also not know that the U.S. is the world’s largest producer of crude oil and has been so for the last six years. In 2023, U.S. drillers produced 12.9 million barrels per day.The history of U.S. production is fascinating.
Production previously peaked in 1970 at 9.6 million barrels per day. That production declined to 5.0 million barrels per day in 2008. In 2009, U.S. producers started using horizontal drilling and fracking techniques to get oil out of “tight” shale deposits. The chart graphically shows what fracking has done for production from U.S. upstream drillers.I expect that U.S. production growth will moderate over the next few years. Producers know that if they produce too much oil, the price per barrel could crash. Look for annual U.S. production growth in the low to mid-single digits. The good news is that growth from the rest of the world is a near impossibility.For investors, energy production company stocks are rarely valued based on the absolute necessity they bring to power the economy. I recommend energy stocks as income investments and as a hedge against something going badly wrong somewhere on the planet. All it takes is someone throwing a nuke at someone else or even the sinking of a supertanker.UBS ETRACS Crude Oil Shares Covered Call ETN (USOI) tracks the oil price and pays attractive dividends derived from selling call options. According to the UBS website, USOI has a current expected yield of 25.51%.More By This Author:PAA: A Unique Midstream Company For Income Investors
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