The Role of the Unpredictable in World Events, Economies and Markets

How Fracking Suddenly Became a Game Changer

Don’t be too sure you know what is coming next, especially in this day and age of rapid technological innovation. Whether it is something high tech like a smartphone or as seemingly low tech as oil production, we just don’t know what is next. Except for change — we can count on lots of that, can’t we?

Energy and the Fracking Revolution
The topic of energy is challenging due to concerns from both an economic and environmental standpoint. A political hot potato for decades, the subject of endless, rancorous debate and a huge geopolitical factor since the first oil embargo in 1973…at least we thought we knew how things worked.

How Fracking Suddenly Became a Game Changer

The Old Story
The US was and is the world’s largest economy and consumer of energy, but it lost its status as the largest producer of energy long ago, instead becoming a major importer. Bad guys controlled energy supplies that were critical to Western economies. They used supply as a weapon itself, but more importantly, they used the dollars from energy sales to fund militaries and terrorists who often opposed America and her allies and did serious harm, as well as constantly threatening Israel.

A recent Wall Street Journal piece describes a radically new picture, one whose implications are only beginning to be felt. The article itself presents compelling data and evidence that serve to reinforce this narrative: Fracking Gives U.S. Energy Boom Plenty of Room to Run

The New Story
The US has suddenly and unexpectedly become the world’s largest energy producer once again! No one saw this coming; we were resigned to our fate, and suddenly a new technology changed everything. For better or worse, we are fracking wells and dramatically increasing their productivity. The latest forecasts show production rising through 2040. And who really knows?

Several Critical Results:

1. Despite a horrific mess in the Middle East, energy prices are stable to declining! Think about that one for a minute.

2. The US is about to go from being the largest importer of energy to being a large exporter.

3. Russia will likely lose its stranglehold on natural gas supplies for Europe (Eastern and Western). This completely changes the equation, which may account for their actions today in Ukraine and elsewhere; the window of opportunity appears to be closing.

4. The long-term development of alternative energy sources can be better supported, because the short-term needs of Western economies can be well supplied at reasonable prices. And innovation also continues to reduce energy consumption (e.g., in autos and manufacturing).

5. Over time, these factors could result in what has to date been unthinkable: another era of cheap, abundant energy, and the dramatic reduction in funding for terrorism and other problematic players from energy revenues.

As we’ve discussed in some of our letters, even as the economy is weak overall and employment languishes, there are important positives in the US economy and in the rest of the world, as well. Never be too sure of the next phase — there are always surprises in store.

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional. Hewins does not provide tax, accounting or legal services.
Roger Hewins
Roger Hewins

President

Roger Hewins is the President of Hewins Financial Advisors, based in North Palm Beach, FL. Roger has more than 30 years of experience in investment management, helping bring the sophisticated financial advice typically reserved for large institutional clients to everyday investors, from high-net-worth individuals and families to small businesses and retirement plans.

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The Role of the Unpredictable in World Events, Economies and Markets

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