In conversations with investors the Shale Revolution is acknowledged as driving US hydrocarbon production up. What is less appreciated is how much this has been a US phenomenon, with no equal anywhere else in the world.

The technologies of hydraulic fracturing (“fracking”) and horizontal drilling were developed sufficiently that they allowed access to enormous reserves that were otherwise out of reach. Although such geological formations are not unique to America, nowhere else has been able to harness all the other requirements necessary for exploitation.

Least appreciated is privately owned mineral rights. Americans take for granted that a gusher of oil on their property will make them rich. But in the rest of the world the government takes ownership – even in the UK, upon whose legal system the US is based.

This has enabled private landowners to negotiate deals with Exploration and Production (E&P) companies. The activity is regulated and taxed by the state and provides royalties to the landowner. I’ve chatted with beneficiaries of this common arrangement, and they typically report that oil or gas production takes up a tiny portion of their land. Drilling a well is noisy and disruptive but once completed there’s not much further impact.

The US has other advantages, including a highly skilled energy labor force, a culture of entrepreneurialism, technological excellence and the world’s deepest capital markets. We also have ample supplies of water. It’s estimated that fracking the typical well requires around 4 million gallons.

These are all the reasons Why the Shale Revolution Could Only Happen in America as we explained in a 2016 blog post.

It wasn’t always good for investors. The opportunities for increased production drew too much capital, and the damage from the subsequent crash hung over the sector for years. The fear of stranded assets kept many away from traditional energy. A nascent recovery in 2019 was crushed by lockdowns during the pandemic, a low point in public health policy that wrongly imprisoned everyone in their homes instead of just the most vulnerable.

Because many investors are unaware of how uniquely American the Shale Revolution is, they also don’t appreciate how much it has impacted global energy markets. In 2014 OPEC saw the threat posed by US shale and pushed oil prices down in an effort to bankrupt these new market entrants. Within 18 months crude fell from $100 per barrel to $25.

Although there was widespread financial pain, the move was too late. Over time giants like Exxon and Chevron moved in, bringing financial heft and technological expertise that lowered costs. US shale was here to stay.

The global impact shows up on production charts covering the last quarter century.

In crude oil, the US is responsible for 53% of the growth in production since 2000. In natural gas we’re 31%. In Natural Gas Liquids (NGLs, which include ethane, propane and butane) the US is 47% of global production and 60% of the growth over this time.

We produce a quarter of the world’s natural gas and are the biggest exporter of Liquefied Natural Gas (LNG).

The result is that increased US production of hydrocarbons is the biggest energy story in the world. Without it, most manufactured goods would be more expensive because transportation (oil), plastics (ethane or crude oil) and power (electricity from natural gas) would all cost more. Lower prices have boosted living standards everywhere.

While America is the world’s biggest energy story, natural gas is the biggest energy story in America. US media relentlessly covers the energy transition towards renewables, ignoring the fact that natural gas production has increased at eight times the rate of solar and wind over multiple time periods extending back 25 years.

The Natural Gas Energy Transition, as we explained last year, is the only energy transition of any consequence going on in the US. It’s protected us from the disastrous energy policies of Europe (see Germany’s Costly Climate Leadership).

Which naturally brings us to midstream energy infrastructure, the enabler of the world’s biggest energy story. Gas demand from power hungry data centers and LNG export terminals underpin growth. Valuations are not as cheap as two years ago but by no means expensive. And energy is the president’s favorite sector, with many countries advised to avoid high tariffs on their US exports through buying more of our oil and gas.

Fund flows show that retail investors have only recently become net buyers of the sector, which should comfort those wary of being late to follow the crowd.

Explaining to investors why America is the world’s biggest energy story invariably grabs their interest.

We have two have funds that seek to profit from this environment:

Energy Mutual Fund

Energy ETF

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