Baby, It’s Cold Outside

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The shale oil and gas revolution has made energy cheaper for U.S. manufacturers and spawned many high paying jobs. The recent drop in oil prices has caused the energy sector to cut back.

The U.S. has a glut of natural gas which has depressed prices below $3.00/btu. Fracking technology has opened up plentiful reserves and driven down extraction costs. This excess supply has created opportunities that are both economic and strategic. Over the next five years, the IEA (International Energy Agency) reported that the U.S. will begin liquefying and shipping gas all over the world and, by 2022, will produce more than a fifth of the world’s gas supply rivaling titans like Norway and Russia. In the liquefied gas market, the U.S. is expected to become the second biggest exporter. This will direct dollars into the U.S. economy. In addition, it will provide a strategic diversification benefit to many of the eastern European countries that rely on Russia for gas supplies. Remember a couple years ago when Russia threatened to put Ukraine in a deep freeze by cutting off supplies? Well, last week Louisiana announced that it will be exporting liquefied natural gas to Poland via the Sabine Pass terminal. Growing exports of LNG to eastern Europe will dull Russia’s influence and power. Diversification is good whether it’s across asset classes or energy sources. Please follow natural gas prices on page 75 of the Global Perspectives™ Book.

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