Our energy future is a topic for much discussion these days. Some like wind and solar, others are in the “drill baby drill” camp.  Either way the global economy will need more energy. Here’s the outlook:

The world will be relying on fossil fuels for decades and I expect upward pressure prices in 2023. Why? Crude inventories are nearly 20% lower than they were a year ago. The Strategic Petroleum Reserve was drawn down last year before the election and needs to be refilled. Prices fell when the reserve was drawn now they will rise as it is replenished. Also, oil demand will increase as China re-opens its economy. The International Energy Agency expects global demand for oil to reach a record 101.7 million barrels a day, a new record. Supply will be 100 million barrels a day.

On the green energy front, spending on low-carbon projects is expected to reach $60 billion this year. It’s estimated that the growth in wind and solar projects has prevented a 5% increase in fossil fuels. But the growth in green energy isn’t replacing traditional energy sources. It is being used along with fossil fuels to run the global economy. In other words, we are using all of the above.  

 That’s why the Biden administration is sending mixed messages. They passed the miss-named Inflation Reduction Act that is really a green energy bill and they talk of global warming, but they are also pushing energy companies to produce more oil, especially in other countries. Still, U.S. production rose last year to 12.2 million barrels per day and there are nearly a third more rigs drilling for oil than a year ago. 

Chevron (CVX) and Exxon Mobil (XOM) are bets on rising demand for years, not merely on higher prices and they offer attractive yields (3.47% and 3.21% respectively). Chevron just announced a share repurchase and Exxon is increasing production offshore Guyana that is expected to produce 1.2 million barrels per day by 2027. Williams Cos. (WMB), a natural gas pipeline company, supplies the liquified natural gas to large LNG terminals. That’s a steady business with a huge barrier to entry.  WMB yields 5.5%.  All are great long-term investments.

Some people prefer to not own fossil fuel companies. I respect that. But those stocks can rise even when the rest of the market falls (up 60% in 2022). Given the need for energy, they continue to be well positioned.

David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.