Saudi Arabia has long been known as the world’s most dominant producer of crude oil, as the Middle East is rich with deposits of this fossil fuel. But the growth and rapid development of U.S. crude output has us on pace to dethrone Saudi Arabia in the not-so-distant future. We are currently on pace to average 10.9 million barrels per day for 2012, marking a 7% growth from the prior year and the largest single year jump since 1951 [for more crude oil news and analysis subscribe to our free newsletter].
“The Energy Department forecasts that U.S. production of crude will average 11.4 million barrels per day next year. That would be a record for the U.S. and just below Saudi Arabia’s output of 11.6 million barrels. Citibank forecasts U.S. production could reach 13 million to 15 million barrels per day by 2020″ writes Associated Press. Note that even with this output, we would still have to import a fair amount of oil, as our consumption habits dictate that we use around 18.7 million barrels per day, the highest in the world.
As technological advancements like fracking continue, our output will only grow, helping us reduce U.S. dependence on foreign oil. That combined with the improving fuel efficiency of cars on the road could put us on the path to being self sufficient as far as our fossil fuel addiction is concerned [see also Crude Oil Guide: Brent Vs. WTI, What’s The Difference?].
Investing in the Boom
While all of that is fine and dandy, what investors are really concerned with is how they can cash in on this trend to profit over the coming years. Below, we outline several options to help you position your portfolio for the U.S. oil boom.
- Energy Select Sector SPDR (XLE): This ETF is one of the most popular energy products in the world, with more than $7.4 billion in total assets. The fund invests in oil and gas companies, 98% of which are domiciled inside U.S. borders. Some notable holdings of XLE include Exxon Mobil, Chevron, Apache, and Halliburton among others.
- United States Oil Fund (USO): This ETF holds front-month WTI futures and is among the most popular commodity ETFs on the market. Note that its strategy is not designed for a long-term buy and hold but rather for more active traders looking for a quick and liquid option [see also 25 Ways To Invest In Crude Oil].
- Market Vectors Unconventional Oil & Gas ETF (FRAK): This ETF invests in companies that are involved in “unconventional oil” operations like fracking and other newer technologies.
Disclosure: No positions at time of writing.