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The Real Future of American Energy Revealed

Written by Brian Hicks
Posted November 25, 2011

The world’s energy markets are being completely transformed.

The results of the changes will affect the global power structure, and America is going to be a major benefactor of it all.

If you believe we’re going to live in a utopia of solar panels and windmills, think the world is coming to an end because of carbon dioxide, or happen to be an Arab sheik that's made a fortune off of America’s endless thirst for oil, you’re not going to like the change.

But if you want to invest in the future of American energy — and make some "evil" profits by helping accelerate the real American energy boom — then you’re going to like where things are headed...

Environmentalists on a Mission

Our helicopter touched down in the middle of a remote forest in the Western Canadian countryside.

The pilot asked, “How long you guys planning to be here?”

“Maybe four or five hours.”

He breathed a sigh of relief.

“That’s good?” we wondered.

“Yes. Last time some people wanted to come out here, I ended up sitting here for 14 hours. A bunch of college kids... they were looking for a rare bird, or a salamander — any kind of animal, really.”

“I take it they weren’t successful.”

“Nope. If they had found what they were looking for, none of what we flew over would be here right now.”

We were up in Northern Alberta, just outside Ft. McMurray. The pilot was talking about the flying he was hired to do for a group of environmentalists on a mission.

They were scouring the region for any reason to shut down all of the oil sands projects. Their last desperate hope was to find a cute, cuddly animal they could use to turn the public against more oil, lower gas prices, and an ample supply of conflict-free energy...

They didn’t find anything, and the boom followed.

As Nick Hodge shows you in this video, the town is absolutely booming. Waitresses are making $20 an hour; mobile homes are on the market for $600,000 — and getting multiple bids!

It’s been building for five years. And there are still new projects being built, expanded, and discovered.

More importantly, it’s just part of what’s changing the future of American energy.

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America’s Real Energy Future

America’s energy future will be much different than what most people picture today.

Al-Falih, President and CEO of state-owned Saudi Aramco, summed up what's really going on in America's energy industry best when he said earlier this week:

The confluence of four new realities — increasing supplies of oil and gas, the failure of alternatives to gain traction, the inability of economies to foot the bill for expensive energy agendas, and shifting environmental priorities have turned the terms of the global energy dialogue upside down. Therefore, we must recast our discussion in light of actual conditions rather than wishful thinking.

He’s absolutely right.

We won’t be surrounded by solar panels and windmills. The cover has been blown off the scam, and the world is waking up to this fact fast.

But hopes for more energy independence aren't dying as a result. They're actually becoming more of a reality than they've been in decades.

The U.S. currently imports just 46% of its oil from foreign countries. That’s down from 60% a few years ago. On top of that, less than 20% of those imports come from outside the Western Hemisphere.

Great news, right?

It is for many who want more secure fuel supplies and (eventually) lower prices.

But it's not good news for everyone. And some very powerful interests are fighting this change every step of the way.

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Winning Fighting the Future

The few but powerful are fighting the transformation and breaking out all the old cronyist tools to do so: political influence, fear mongering, etc.

The biggest (and most ridiculous) example came last week when the Obama administration announced it was punting on a “controversial” pipeline.

The project, known as the Keystone XL Pipeline, is to stretch from the oil sands in Alberta down to the refineries on the Gulf Coast. It would also pick up oil from the Bakken formation in North Dakota...

In all, the pipeline would add a steady flow of 435,000 barrels per day to the United States and create as many as 20,000 jobs to build it.

Sounds perfect. A slew of jobs and energy, all paid for without a single dime of government "investment."

But there’s a problem.

Groups opposing the pipeline claim one of the nation’s largest and most important aquifers — the Ogallala Aquifer, which accounts for 78 percent of the water used by residents and industry and 83 percent of the state's irrigation water — would be greatly harmed by a spill.

They claim a single spill from the proposed pipeline would endanger the Heartland's water supply and well over half of the nation's food supply.

Inside Climate News reports: 

Even a fairly localized spill could cause serious problems. The Ogallala is already under threat from over-depletion, because people are pumping out groundwater faster than it can be replenished by rain and snow. The strain is apparent in northern Texas, where some fear another Dust Bowl as the water table continues to drop.

When TransCanada evaluated the risk of spills on the pipeline, it found that over the next 50 years there could be 11 spills, each releasing more than 50 barrels of oil. (A barrel holds 42 gallons.) But a recent research paper by John Stansbury, a professor of environmental and water resources engineering at the University of Nebraska places the risk at 91 such spills over 50 years.

Sounds ominous, I know.

We've got to stop a pipeline from going through this aquifer. Ogallala Aquifer Pipeline MapThe risks don't justify the rewards...

What they don’t tell you, however, is that the aquifer is already crisscrossed by pipelines (see map at right, click to enlarge.)

There are dozens of pipelines carrying oil, natural gas, petrochemicals, and more through the aquifer. And they've been there for decades.

It makes you wonder, is it really the aquifer they’re fighting?

Of course not. They’re fighting the oil.

And there are a lot of powerful interests on board...

Saudi Arabia probably has the biggest stake in preventing the Keystone XL from ever being built. And it's only going to get worse.

In order to prevent the riots and upheaval that have swept through many of its neighboring nations, Saudi Arabia has lavished cash on its citizens through public works projects, services, and handouts to the tune of $130 billion.

The aggressive spending has pushed the oil-rich nation to the point at which it needs oil to trade above $88 a barrel just to break even.

But that break-even price is only going higher as its best customer is becoming less dependent...

The United States is now important less oil from Saudi Arabia than it has in ages.

The percentage of oil imports coming from Saudi Arabia have declined from 11.2% to 9.3% five years ago.

The successful completion of a rapid, cost-effective transport system for the massive amount of oil being pumped out of the ever-growing supplies in the Bakken and Canadian oil sands would only further reduce Saudi Arabia's geopolitical stronghold in the energy industry.

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So Long, Wishful Thinking... Hello, Growth and Prosperity

One of the things we like to do in Freedom & Capital is to look back from the future. We do this to put current events in perspective and in the context of a bigger picture.

That's why we can see these current events from 20 years down the line as the point when the energy world really changed.

Old entrenched interests fought against change and advancement...

Governments and their cronies tried to prevent new energy sources from coming online...

Environmentalists tried anything they could to advance their vision of what the future will look like, regardless of how inefficient and costly...

In the end, simple economics won out.

The old energy companies responded to demand and high prices and they pushed forward, developing everything they could.

And investors who looked beyond the week-to-week madness of the markets, politics, and other events made absolute fortunes.

Good investing,

 Andrew Mickey Signature

Andrew Mickey
Editor, Wealth Daily

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