Sarah Travers
In the ever-evolving energy landscape, the rise of clean energy sources like solar and wind power has been making headlines. Concerns about emissions and the environment have put oil and natural gas in a less favorable light. However, Kinder Morgan, a significant player in the energy infrastructure sector, suggests that oil stocks are here to stay. Let’s explore why you can still consider investing in oil and natural gas companies.
The Backbone of Energy Transportation
Kinder Morgan, recognized as a major midstream company in North America, holds a crucial role in the energy supply chain. It owns and operates a vast network of pipelines, storage facilities, transportation assets, and processing facilities.
These assets are used to transport oil and natural gas from production sites to consumers. The key takeaway here is that midstream companies like Kinder Morgan generate revenue through fees for asset usage rather than being directly tied to product prices.
Long-Term Vision
Kinder Morgan’s investment strategy extends well into the future, with management looking decades ahead. The company’s future success is intricately linked to the continued demand for oil and natural gas.
This perspective is essential as energy infrastructure projects require substantial capital investments. Kinder Morgan’s careful assessment of long-term demand ensures that their assets remain viable and provide adequate returns.
Sustained Demand in a Growing World
The driving force behind the resilience of oil and natural gas is the projected global population growth. Between 2022 and 2050, the U.S. population is anticipated to grow by 12%, accompanied by a nearly 70% increase in GDP. These trends are not unique to the U.S., as the entire world experiences similar demographic shifts. Energy remains the foundation of modern society, and a growing population and economy signify an increasing need for various energy sources.
Renewable energy is set to play a substantial role in meeting future energy demands, with an expected 140% growth in the United States between 2022 and 2050. While this growth is significant, it should be noted that it is based on a relatively small starting point. Conversely, coal, a highly polluting energy source, is expected to decline by 50%. Oil and natural gas, however, are projected to experience more modest growth, with demand expected to increase by 13% and 15%, respectively. This indicates that oil and natural gas will continue to be integral to the global energy mix.
The Endurance of Oil and Natural Gas
While clean energy’s rapid expansion garners much attention and investment, it does not signal the demise of oil and natural gas. Historical data reveals that new energy sources take decades to achieve significant market share. Oil, for instance, took 60 years to reach 40% of the global energy market.
Kinder Morgan’s positive outlook on oil and natural gas provides confidence to energy investors, emphasizing that these fuels will remain essential for decades to come. So, if you’re looking to invest in the energy sector, don’t discount the resilience and longevity of oil and natural gas stocks.
