America is the strongest nation on Earth, but we depend on foreign energy suppliers. In fact, we import more oil than any other country. This is our crucial weakness as a superpower.
Now, that is changing big-time in ways that are good for America and bad for China. And this change offers you extraordinary investment opportunities.
Here are some information bombshells the U.S. Energy Information Administration recently dropped…
- In October, China will pass the U.S. to become the world’s biggest net oil importer.
- China will import 6.45 million barrels of oil a day. At the same time, the U.S. will import 6.23 million barrels of oil a day.
- On a yearly basis, China’s overseas purchases will surpass the U.S.’s next year. Net Chinese imports will be 6.57 million barrels per day (bpd) next year. That’s higher than the U.S.’s 5.71 million bpd.
This is happening even though China will use 11 million bpd of oil in October while the U.S. will use 18.6 million.
That’s because new technologies, including fracking and horizontal drilling, are shifting America’s crude oil production into overdrive. U.S. wells pumped out 7.5 million bpd in July.
Add in other liquids, including liquefied natural gas and biofuels, and total U.S. production will rise to 12.4 million bpd by October. China, meanwhile, will produce only 4.57 million bpd.
China’s largest oil fields are mature and production has peaked. Oil explorers in China are focusing on the western interior provinces and offshore fields.
Water injection has raised the oil output of China’s old fields. But fracking has met with mixed success so far. And that leads to the next chart…
You can see this is bad news for China… at least, if China hopes to be an energy-independent superpower.
To be sure, China could come up with new technology. But in the meantime, everybody in China wants to drive like a car-razy American.
- China’s auto sales rose 10.4% in July alone to 1.24 million units. For the most part, those aren’t replacement cars. They are thirsty new vehicles lining up at China’s gas pumps.
- China’s use of liquid fuels will grow to more than 11 million bpd in 2014 – up 13% from 2011.
- And by 2040, the EIA expects China will use 20 million bpd, compared with 19 million bpd for the U.S. That’s more than double what China used in 2010.
So where is China going to get the oil to fuel all those cars? Well, hang on to your hats for this next chart, showing non-OPEC oil production growth…
As you can see, the U.S. is the big cheese in production growth as well. No one else in the world comes close when you measure new production outside OPEC.
But how about production growth within OPEC? OPEC July output dropped 1.1 million bpd compared to last year. There’s no growth there.
So, when China looks for new sources of oil, it’s probably going to have to come to us.
According to forecasts, the world will use between 1 million and 1.2 million more barrels of oil next year than it did this year.
Longer-term is more of a guesstimate. But everyone agrees the world will use a lot more energy. For example, the EIA says world energy consumption will rise 56% in the next three decades.
The EIA singles out energy demand growth in China and India, as well as legions of thirsty new cars in other developing nations.
Heck, the average person in China consumes about one-ninth the oil an American does. What if everyone in China doubled their energy use?
To be sure, there are all kinds of energy. And there could be new technologies that help wean the Chinese and the rest of us from fossil fuels. But for now, petroleum-based gasoline is still the best way to keep your car on the road.
It looks like China’s oil demand is shifting into overdrive. And Uncle Sam could end up with a lot of power in a rapidly shifting relationship.
How You Can Profit
Here’s one idea that could put money in your pockets. The SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP). The XOP gives investors exposure to plenty of smaller names in the energy space – companies that could do very well as America pumps more oil and natural gas.
There are a number of select companies that will profit significantly from America’s new oil boom. To find out more about them, read my new special report, “How to Profit From America’s Energy Boom and China’s Oil Thirst.”
View original at: Investment U
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