Study of Energy investment
Continuing my coverage of the highlights from last week’s 20th annual Value Investing Seminar in Italy…
Today, I’ll share a big investment theme I’m excited about right now: I believe we’re in the early stages of an “Energy Supercycle” that’s part of a larger commodity supercycle that could last for decades.
Here’s an interesting chart I shared in my presentation at the event that captures this:
You can see that commodities have bounced off the depression that bottomed during the pandemic… but if you look at the long-term trend line based on prior peaks, they still have a long way to go over the next two decades.
In particular, electricity demand is exploding – driven by the data centers needed to power AI (an AI query consumes roughly 10 times the electricity as a routine Google search), as you can see in this chart I shared in my presentation:
These data centers are critical to the development of AI, automation, autonomous vehicles, online transactions, and much more… and they need power.
That means demand for electricity is set to grow much faster than anticipated.
Sure, plenty of folks wish we could meet this big demand from renewable-energy sources alone. But that’s just not possible today – and it won’t be for many, many years.
As such, meeting this electricity demand will have to come from natural gas, coal, and nuclear energy.
As I explained in my June 17 e-mail, I’ve already been bullish on nuclear energy to help meet the demand.
Meanwhile, the use of coal as a source of electricity is on the decline in the U.S.
But the other source – natural gas – is the other area where I see big investment opportunity…
In fact, by itself, natural gas is used to fuel 43% of America’s electricity.
This chart from a report my team here at Stansberry Research put together shows natural gas consumption in the U.S. over the past few years (the red line is average U.S. monthly natural gas consumption – which is higher in the winter – and the straight lines are average U.S. annual natural gas consumption):
Since 2018, natural gas consumption here in the U.S. has increased by an average of 4% annually. Last year, the U.S. consumed 89 billion cubic feet per day (“bcf/d”) of natural gas – the most on record.
