This Energy Company Could Help End the Massive U.S. Trade Deficit
Ask any economist about the future of America and you will likely get a sobering answer.
Data on exports and imports for the month of November 2012 showed the United States bought $231.3 billion of goods from foreign sources and exported only $182.6 billion of goods. To finance this $48.7 billion gap, the United States sells Treasury bonds — which are basically IOUs financed by the government.
But the United States has been running a deficit for decades and the interest paid on the Treasury IOUs is a measly 2%, so why even worry about the trade deficit?
Because we are already seeing the negative effects of this overspending. The U.S. economy grew just 1.8% in 2011 compared to the average of 4.5% growth in the second year after the end of each recession since 1970, according to data from the Bureau of Economic Analysis. This means the United States has now about $407 billion dollars per year of lost economic growth (4.5% normal growth minus 1.8% times $15.09 trillion economy = $407 billion).
And what’s the biggest culprit in the country’s inability to balance the national checkbook?
In 2011, oil imports cost the United States about $331.6 billion and accounted for 58% — almost two thirds — of the total trade deficit.
Admittedly, the U.S. trade deficit is not the only factor in the slower growth, but spending more than $300 billion a year on oil does not help.
What can we do?
As a stock picker, I wouldn’t normally worry about larger macroeconomic trends. But given this scenario, one company stands out as a major player. In fact, this company could actually help spark the third industrial revolution and help solve the nation’s debt problem, as Game-Changing Stocks Chief Strategist Andy Obermueller points out.
Let me explain…
While the United States still imports a huge amount of oil, the country is the No. 1 natural gas-producing nation in the world, at 611 billion cubic meters, according to the CIA World Fact Book. It’s also No. 4 in proven reserves — at 7.7 trillion cubic meters — and that isn’t counting the 50 trillion cubic meters of estimated probable reserves.
But in contrast to the price of crude oil, which has been in a fairly constant global trading range through the years, the price of natural gas varies from as high as $18 per million British thermal units (Btu) in Asia to 10-year lows of $3 per million Btu in the United States.
And that’s where the opportunity lies. Over the next few years, the United States has a chance to narrow its trade deficit by a substantial margin, thanks to advancements in drilling techniques. And in the process, investors with foresight could make a king’s ransom.
Let me explain…
The discovery of new reserves using production techniques such as hydraulic fracturing (or fracking) drove the price of natural gas down in the by more than 90% between 2005 and June of 2008, as you can see in the chart below.
To be transported, natural gas must be converted into liquefied natural gas (known as LNG). But the country simply doesn’t have enough infrastructure built up to convert natural gas into LNG and export it on a massive scale.
That’s not an exaggeration. Because of government licensing, Cheniere Energy is currently the only company able to export LNG to non-free trade countries.
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