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Analyst: U.S. will become energy independent, but ...

A prediction that the United States will eventually become energy independent might have a destabilizing impact on world peace, noted analyst Donald Broughton said Thursday at the Commercial Vehicle Outlook Conference. (The Trucker: DOROTHY COX)

By LYNDON FINNEY
The Trucker Staff

8/22/2014

DALLAS — America will become energy independent sometime in the future, but that might be unsettling for world peace, Avondale Partners’ Donald Broughton said here Thursday at the closing session of the Commercial Vehicle Outlook Conference.

The independence, he said, is the result of successful fracking operations and harvesting of oil — a lot of the oil coming from North Dakota — both of which add to the coffers of the transportation industry.

The conference is being held in conjunction with the Great American Trucking Show, which began Thursday at the Kay Bailey Hutchinson Convention Center here. Avondale Partners provides investment banking, capital markets and wealth and investment advisory services to selected industries, one of them trucking.

The improving U.S. energy environment is impacting trucking in a positive ways, Broughton said.

“After years of volatility, we are seeing the lid held on (diesel prices), he noted. “Given all the unrest we’re having at home, all the unrest we’re having in the Middle East, oil should be significantly higher than it is. Were it not for North Dakota and the success of shell operations, it wouldn’t be surprising to see oil with all the political unrest at $140 to $150 a barrel and that would translate into much different diesel prices than the industry is experiencing.”

Oil at mid-day Thursday was selling for just over $94 a barrel.

Unfortunately, Broughton said, energy independence for the U.S. could have “dire” ramifications for the world’s stability, adding that North Dakota is today producing 20 percent of the production of Saudi Arabia.

“Counter to the popular wisdom that that would lead to a safer world, I believe it may lead to the exact opposite,” Broughton said. “If we become truly energy independent, then I believe there are going to be people out there who say, ‘why should we spend billions of dollars being the world’s policeman? The Iraqis and the Iranians are going to fight it forever. Why should we care? We don’t need their oil. Let them fight it out.’ That’s dangerous because it will eventually bleed back to the U.S. The world has experienced a peace dividend since the end of World War II with us acting as the world policeman and not allowing anyone to be too over the top.”

Broughton pointed to fracking as a leading aspect of energy independence.

“Fracking has become more and more successful,” he said. “I can’t over-emphasize that fracking is revolutionizing the energy industry worldwide.”

The fracking industry is five or six times more successful today than it was just four years ago and foreign nations are hoping to plug into that success, he said. But U.S. fracking companies are keeping their secrets close to the vest.

Overall, Broughton said there was a relatively optimistic outlook on the U.S. economy.

“But,” he quickly added, “we live in interesting times. Simply, I believe we are living in a slow growth/no growth economy except for fracking.”

As for trucking’s economic future, all modes are struggling with capacity, but said, “you all are going to have a better economic future because you are seeing (shipping) prices up.”

There’s growth in tonnage and the number of loads transported, Broughton said.

But there’s a caveat.

“Expenses are going up, too,” he noted.

Broughton said he was surprised how strong truck tonnage is and how strong volumes are despite the fact that there had been a 5.5 percent growth in intermodal transportation, which had been fueled by domestic intermodal growth.

 

“We’ve had railroads cutting into shorter and shorter and shorter lengths of haul,” he said. “Think back 10 or 15 years ago. The railroad was the enemy.  In case you haven’t noticed, you are sleeping with the enemy.  It has become a part of almost every major carriers’ and even smaller carriers’ portfolio.”

As a result of increased intermodal traffic, the length of haul has come down for public carriers. “In long-haul truckload volume, there has been major shrinkage. It is important to understand why intermodal is having a bigger impact on trucking now than it’s ever had,” he said.

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.
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