Professor Glenn A. Okun
Electricity is emerging from a prolonged period of stagnant demand with a bang. Some estimates forecast a doubling of demand within five years. Technology and deglobalization have combined to drastically change electricity consumption and long-term demand for oil and gas.
Artificial intelligence and onshore manufacturing have converged and overwhelmed the electric grid. In addition, the clean energy programs of many states are incorporating additional use of electric power for transportation, heat and heavy industry.
Data centers that run artificial intelligence operations are especially heavy users of power. These centers can be constructed much more quickly than power capacity can be added. It has been estimated that a new data center comes on line in the United States every three days. Construction timelines for electric power generators are measured in years.
Legislation driving the construction of domestic manufacturing facilities has exacerbated the demand problem. The size of these federal initiatives guarantees that manufacturing demand for electricity will be a persistent issue.
Rising demand complicates the planned transition to clean energy. Existing clean energy technologies, including wind, solar and geothermal sources, are not reliable, large-scale solutions for electricity (see https://therabidcapitalist.com/2023/10/17/the-green-cycle-has-turned-red/, https://therabidcapitalist.com/2023/10/21/green-tech-wreck/, and https://therabidcapitalist.com/2023/09/21/it-is-not-easy-being-green/).
Fossil fuels are the only solution to these energy needs. It should not be surprising that major consumers of electricity have begun to negotiate large volume, long-term supply contracts.
These trends favor our oil and gas majors portfolio (BP, SHEL, TTE and XOM) in both the short and long term. This investment strategy has continued to grow in financial attractiveness.
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