Prediction Week: How Energy Investors Can Sidestep Oil Volatility in 2016

David Fessler
by David Fessler, Energy & Infrastructure Strategist, The Oxford Club
wind turbines and modern solar panels in the country side

It finally happened...

Earlier this month, Congress lifted the 40-year-old ban on crude oil exports.

Will this affect global oil markets? The short answer is: not really. The reason? The U.S. is still a crude importer.

At the moment, the U.S. imports about 50% of its total crude, or about 9.24 million barrels per day (bpd). Roughly 35% of those imports are from OPEC countries - and 20% come from Persian Gulf countries.

Lifting the export ban is a great policy decision, to be sure. As I wrote back in August, exporting crude supports our free trade policies - a key piece of our economic engine. However, in the near term, it will change very little with regard to oil prices. There is simply too much oil production around the world right now.

Don’t worry, though; my 2016 prediction sidesteps all of that uncertainty...

Solar Will Shine in 2016

Interestingly, the same bill that lifted the oil ban also contains some tasty bits for renewable energy - primarily solar.

Before this bill, the 30% investment tax credit (ITC) for solar and other energy-saving devices would have expired at the end of 2016. However, Democrats pushed for and received a big extension. As a result, the solar ITC will remain at 30% through December 2019.

It will then decrease 10% per year through 2021. From there, it will remain at 10% permanently.

There really isn’t any way to overstate the positive implications of this. As MJ Shiao, director of solar research for Greentech Media (GTM), said, “The extension of the solar ITC is the most important policy development for U.S. solar in almost a decade.”

According to GTM, the extension of the credits could lead to almost 100 additional gigawatts of solar by 2020.

That translates to a $130 billion investment.

It’s clear that renewables are set to have a great 2016 (and beyond). But there’s more.

The Energy Disruptor Is Coming

Thanks to this incredible trend, there’s something big quietly happening in the energy world. It’s a huge disruption in the way electricity is made, stored and used.

Let me explain.

See, today utilities generate electricity and we use it right away. Now, imagine being able to store that power for use later...

That’s what’s coming. And it’s coming faster than anyone realizes, thanks to a major increase in solar production and a massive reduction in the cost of storing electricity via battery.

In the not-too-distant future, utilities will no longer have big generating plants. Solar energy systems will produce much of the power we use. That’s because we’ll finally be able to overcome solar’s one big weakness: nighttime.

Batteries will allow us to store the extra electricity manufactured during the day. They’ll also help out utility companies on cloudy days. You see, batteries act like baseload power plants on the grid. But they have one big advantage...

Utilities can turn them on and off instantly from a central control computer.

It doesn’t stop there, either. Lower battery costs are also bringing down the costs of electric vehicles (EVs).

Soon, Tesla Motors Inc. (Nasdaq: TSLA) will introduce and sell EVs that are price-competitive with those that have internal combustion engines.

Once this happens, EVs will reach a customer acceptance tipping point.

Now, more EVs on the electric grid means even more storage available to utilities when they need it. Remember, utilities can just as easily access an EV storage battery (with the right software) to provide short-term power in a given area.

The bottom line is that 2016 is going to be boring for fossil fuels. However, it couldn't be a more exciting time for renewable energy.

Solar power, battery storage and EVs are all going to make big leaps forward in 2016. You’ll want to make sure your portfolio holds some of the highfliers in the renewable energy sector.

Good investing,

Dave

Have thoughts on this article? Leave a comment below.

P.S. If you’re interested in solar stocks, you should join me at the 2016 Investment U Conference, April 13-16, in Carlsbad, California. Along with my colleagues Sean Brodrick, Alexander Green, Matthew Carr, Marc Lichtenfeld and others, I’ll discuss the best energy and commodity buys right now. Click here for more information. Just know that the early bird pricing for registration ends December 31 - so be sure to claim your spot quick.


A “Pick and Shovel” Play on Solar

Longtime readers have seen this chart before, but it’s worth revisiting. That’s because it perfectly illustrates Dave’s argument that solar energy use will only grow as costs continue to plummet. As you can see, this shift is already underway... Right now, consumers and businesses are using solar to generate a record 64,892 megawatts of energy. And as the cost of solar sinks, more and more consumers are electing to have panels installed.

To take advantage of this trend, Dave recommended Sprott Physical Silver Trust (NYSE: PSLV) to his Oxford Resource Explorer subscribers.

The Sprott Physical Silver Trust is fully backed by physical bullion and trades like any other stock. It currently has nearly $1 billion in physical bullion. You're probably asking, why silver? It's simple...

One GW of solar modules uses 8.3 million ounces of silver. And according to Dave, “That 1 GW of solar modules (about 50 million) is enough to power 750,000 homes. The total silver mine production in 2014 was 877.5 million ounces... solar module construction is currently using about 8% of the mined silver produced worldwide.”

So as the solar boom gets underway, silver will tag along for the ride. Purchasing units of Sprott Physical Silver Trust is your safe and secure way to get in on the action.

- Alexander Moschina with David Fessler

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