3 Companies That Could Save America From $250 Oil

Despite increased oil production in the U.S. from unconventional sources such as the Bakken and Eagle Ford shales, oil prices haven't gone down. In fact, the price for a barrel of West Texas Intermediate crude is at about $93 and climbing. What's even worse is that one international group believes that the price of oil is poised to go up -- way up.

Who is proclaiming this bad news? The Organization of Economic Cooperation and Development, or OECD. Based on its models, a barrel of oil could be in the range of $150 to $270 by the end of the decade. Let's look at why they could be right and how we could avoid the sting of surging oil prices.

Why they could be right
Despite the large increase in domestic production, it costs more to access these new sources, and demand is still outpacing supply. According to EIA, demand for oil was about 1 million barrels per day higher than supply in 2011, and the projections for global demand are expected to continue to climb, thanks in large part to two countries: China and India.

On a worldwide proven-reserve basis, China and India are not well endowed, nor do they have a copious amount of deposits. Collectively, the two countries have only about 20.4 billion barrels of proven reserves, or about 1.3% of the world's total supply. Also, a few weeks ago, the U.S. Department of Energy reported that China had surpassed the U.S. as the world's largest importer of oil. From a raw numbers perspective, India doesn't hold a candle to China, but it still imports about 80% of its oil needs. With China and India -- the two most populous countries in the world -- growing GDP at roughly 8% and 6% annually, demand will more than likely skyrocket.

Why they could be wrong
Models are great, and they can give a decent window into the future -- if the correct assumptions are made. The OECD admits that these projections could be thrown off by two things: a slowing of global GDP, and the potential for oil substitutes to capture market share. Obviously, a slowing economy would put a dent in oil demand, but growing oil prices could be what brings GDP down as well. According to the IMF, imbalances in oil supply and demand could affect global GDP growth by as much as 1% annually -- a bit of a Catch-22.

With oil potentially getting that expensive, we need to seriously consider the potential of seeing another energy source replace oil demand. In the past 23 years, gasoline prices and the price for a barrel of West Texas intermediate in the U.S. have traded at a multiple of roughly 33.1. Based on the OECD's projections, this could mean that gasoline in the U.S. would cost somewhere in the range of $6.05 to $10.85. With current prices already causing a consideration of alternative fuels, $10 a gallon certainly would tip the scales in the favor of alternative sources.

What a Fool believes
More than 73% of petroleum consumption in the U.S. is from the transportation sector, and that's why automotive fuel costs are so important for U.S. energy. Using an average efficiency of 23 mpg per vehicle, about 15,000 miles driven per year, and the estimated cost of a gallon of fuel from earlier, five-year fuel costs for an individual could jump from $11,200 today to a staggering $32,900. 

With fuel costs potentially tripling in seven years, there is an immense opportunity for companies that seek to replace oil, and there's a three-headed-monster of companies that look as if they could potentially do just that: Tesla Motors (NASDAQ: TSLA  ) , Westport Innovations (NASDAQ: WPRT  ) , and Clean Energy Fuels (NASDAQ: CLNE  ) . Here's how.

For the individual consumer, the potential in alternative fuels is currently a bit challenging. The infrastructure for natural gas fueling stations simply isn't robust enough, and the space required for CNG fuel tanks makes it impractical for smaller vehicles. That's why Elon Musk's automotive baby, Tesla, is so attractive. Not only are its current vehicles basking in critical acclaim, but the company is also taking drive-train orders from Toyota Motors and Daimler for their own electric vehicles. Some may argue the merits of an electric car, but it certainly looks more economically viable with $10-a-gallon gas.

Based on current technology, we don't have the means to replace heavy-duty engines with electric ones -- and that's where natural gas engine manufacturer Westport comes into play. The company has developed a wide profile of engines used across the spectrum. It has OEM contracts with General Motors, Ford, Volkswagen, Hyundai, Fiat/Chrysler, Volvo, and Peugot-Citroen to build engines for both fleet vehicles and light-duty trucks. Its partnership with Cummins (NYSE: CMI  ) gives it an inside track on the medium duty, long-haul trucking market. Furthermore, its collaborative work with Caterpillar (NYSE: CAT  ) also provides a strong outlet to provide heavy-duty and off-road engines with a natural gas option. So whatever electric vehicles might not be able to cover, Westport has a solution.

When natural gas vehicles do start making an impact on U.S. roads, we'll need a way to fuel them, and Clean Energy Fuels is working on it. While its infrastructure is nowhere near matching the 150,000-plus gasoline fueling stations in the U.S., its natural gas fueling stations represent about 27% of all the nation's CNG stations. It has also entered into a partnership with Chesapeake Energy (NYSE: CHK  ) to deploy CNG stations every 250 to 300 miles across the country. That may not be enough coverage for everyday consumers, but it could be a big win for the trucking industry.  

None of these three companies will be able to solve the oil-alternative solution by themselves, but together they could form a formidable foe to break the oil cycle. If you're on the lookout for some currently intriguing energy plays, check out The Motley Fool's "3 Stocks for $100 Oil." For FREE access to this special report, simply click here now.


Read/Post Comments (33) | Recommend This Article (30)

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  • Report this Comment On March 23, 2013, at 12:42 PM, tigerade wrote:

    I've been saying this for years now. Drilling for more oil will do nothing to ease rapidly growing demand from China and India. We should have been trying to wean off oil years ago. I don't think it's too late though, but a good start would be for vastly more fuel efficient cars, and more EV's. I don't have much opinion on CNG vehicles, but that's an option too.

  • Report this Comment On March 23, 2013, at 1:17 PM, callantr wrote:

    What if we were to pass a law to make it illegal to export any form of crud or any of its by products from this country over seas. Making it so that all resources of crude are used here. Make it okay to export ethanol to any country that wants it, but keep our domestic crud for the use in our country.

  • Report this Comment On March 23, 2013, at 1:51 PM, johngol4 wrote:

    the 3 companies that can save us from $250 oil are

    1) goldman sachs

    2)chase

    3)morgan stanley

    the U.S. had it's largest supply of oil in years in 2012 and it was trading at $90 plus....and for the first time fuel was our number 1 export....if they think americans are going to sit around and watch banks get rich from commodities and not do their job....they are wrong

  • Report this Comment On March 23, 2013, at 1:52 PM, janlarmil wrote:

    Don't be fooled. We will be soon awash in petroleum as more and more comes to market. Look for $50/bbl or less in the not too distant future. If the politicians stay out of it, the law of supply and demand will govern and drive the price down.

  • Report this Comment On March 23, 2013, at 1:55 PM, medguy1 wrote:

    Here's an idea..STOP EXPORTING!!!!! WE export more than we import. That means we already ARE "Energy Independent", oil companies are just selling it all overseas.

  • Report this Comment On March 23, 2013, at 2:23 PM, dogjon01 wrote:

    I still have shares in SASOL since 83

  • Report this Comment On March 23, 2013, at 2:30 PM, xekzno wrote:

    Forget Oil as a fuel, we already know that we can use water. Don't tell me that it's not possible. People have been and are already doing it. If you don't think it's a good way to power cars or anything else you'd be mistaken just like you would be if I would tell you 200 years ago people would have a personal computer or a phone that could allow you to talk wirelessly around the world to another person.

    Video below of a water powered car in Japan

    http://www.youtube.com/watch?v=CrxfMz2eDME

    Video Below of a water powered car in the usa

    http://www.youtube.com/watch?v=Ir5XgMiXlzM

  • Report this Comment On March 23, 2013, at 3:42 PM, Ronmc2 wrote:

    EVs have a 30% larger Carbon Footprint than Gas powered vehicles. And with Lithium becoming a scarce commodity, we trade one declining, scarce resource(petroleum) for another(that we don't control).

  • Report this Comment On March 23, 2013, at 3:56 PM, JerDCot wrote:

    The price of fuels will NOTgo downward without competition reintroduced into the market via independently owned refineries located inland and far away from the coasts of the USA. Piping crude to the Gulf coast refineries will only aid the selling of refined fuels to overseas cuatomers and not create the competition that will lower prices to consumers in the USA. Cheap transportation fuel cost is the edge that will permit the USA to compete against the cheap labor costs in overseas markets like China and India. So, demand more refineries if you do not want to be held hostage by high costs of alternate forms of energy.

  • Report this Comment On March 23, 2013, at 4:02 PM, Omabistake2008 wrote:

    "3 Companies That Could Save America From $250 Oil"

    It seems elected liberal democrats could save America from the same fate if only they would drop the blind devotion to their religion of global warming and misplaced notions of capitalism being evil and unfair and the sole cause of everything wrong in the world.

  • Report this Comment On March 23, 2013, at 4:03 PM, DRayZ wrote:

    The Elephant in the room is the fact that much of our electricity is generated by Coal. So, as we are ballyhooing electric vehicles, we are at the same time trying to shut down the very sources of power that they rely on! Now if Elephant dung can be burned cleanly or converted to ethanol, we may have a good thing here :)

  • Report this Comment On March 23, 2013, at 4:13 PM, IamBlessed2 wrote:

    This articles' stated facts are somewhat contradictory, to one I read yesterday, on the exact same subject. It said that the US produces nearly as much oil as Saudi Arabia. That makes us number two in oil production in the world. This other article said that due to our more efficient gas burning cars, that we are consuming much less gas than we did four years ago. I believe this is true. However, due to greed for higher and higher profits, I don't see the US restricting the export of our oil. Unless something earth shattering happens, free market oil importing and exporting will continue. The people I really feel for, are the ones using oil to heat their older homes and have very little choice. Talk about being fleeced!

  • Report this Comment On March 23, 2013, at 7:32 PM, gedwajordan wrote:

    I don't believe for a minute that demand is outpacing supply.

    OPEC plays games with production to drive their prices up. Speculators also ruin it for the rest of us. Oil should be nationalized, just like Venezuela.

    When we develop enough alternatives to fossil fuel, just watch the Arabs start producing the heck out of the stuff and offering it dirt cheap to try and entice us away from the alternatives.

  • Report this Comment On March 23, 2013, at 8:22 PM, peterwolf wrote:

    HAHAHA !! So these 3 companies are going to 'save' America from the evil oil companies. What a joke !! Tesla Motors ( a company I know well here in California) is kept alive only because of money poured into it by its wealthy founder and by tax subsidies from a bankrupt Sacramento. Just like Solyndra and Fisker Automotive were going to 'save America'. Right?? And what about all those solar panel farms that were going to save us? They're unable to produce even a fraction of the energy we need.

    It's clear the writers of this article get their informatio from reading Mother Jones and listening to Jerry Brown press conferences.

  • Report this Comment On March 23, 2013, at 10:06 PM, DavidGRogers wrote:

    There is truly a lot of Foolishness in the essay.

    Does the author realize the revolution going on in oil production? Try as they might, the speculators will lose to new reality of the marketplace. Does anyone really think that the Bakken and Eagle Ford are the only large oil reserves in the world that can be fracked?

    And the speculators are giving oil producers every incentive to frack as much as they can. For this reason, only a fool would buy oil futures or, sadly, invest in alternatives to oil right now.

  • Report this Comment On March 23, 2013, at 11:23 PM, bugmenot wrote:

    The US could be energy independent today. But Liberal Democrats and their eco-terrorists have decided that it is better to screw the poor and middle class with high energy costs while using junk science to give taxpayer money to solar firm executives as bonuses for bankrupting their company - the Obama Way! DDT was banned for killing eagles (or so they say). Wind farms have killed more eagles than DDT! Maybe we should test wind farms by dropping Democrats into the blades to test survival rates.

  • Report this Comment On March 24, 2013, at 12:33 AM, jndresen wrote:

    The trouble with oil production is Carter almost ended American oil production. Domestic oil production is down from what it was in the 70’s. Bush approved a lot of permits on private land which is what the Bakken deposits are on. Obama bought up 19 M more acres for the wild horses to run but the real reason was to limit oil production on that land. He has approved only one well in the Gulf since being elected and that was to Brazil in water that is twice as deep as the one that leaked in the gulf. When our domestic production gets to a point that we are producing more oil than we can consume and export the surplus, our oil prices will continue to be high.

  • Report this Comment On March 24, 2013, at 12:46 AM, HugoRedd wrote:

    How much oil was used to fight the Iraq war? Cheney made sure that his pockets were full and that he made millions upon millions at the cost of our sons and daughters. If I sound sarcastic, I am. I am 30 year active duty Navy veteran and I just get aggravated at the extreme these oil barons went to make money from the blood of American service people. Did you see the Cheney interview on cable tv, I think it was HBO. He was very smug and sure of himself. What was kind of funny was the fact that the President wouldn't pardon Scooter Libby and pissed Cheney off. W wouldn't change his mind and Cheney thought he ran the show, but W showed him. Both should answer for something they started that was not necessary to begin with.

  • Report this Comment On March 24, 2013, at 3:36 AM, AKretired wrote:

    Like Big Pharma trying to control as much of the drug market, Big Oil is the doing the same on the energy market.

    Big Oil is international and along with various oil groups, OPEC comes to mind, the price we pay comes from various groups and factors affecting production and supply.

    When Libya's oil production stopped the Italian economy was affected since they depended heavily on Libya's oil.

    We regardless of our views must face the fact we are totally dependent on oil, in its various forms. Remember you plastics are from oil. How many products do you buy is in plastic?

    Stopping bad habits in oil consumption is up to everyone ( the average person) because Big Oil is in it for itself.

  • Report this Comment On March 24, 2013, at 6:42 AM, DATSUN1967 wrote:

    ITS A SHAME THAT OUR EXPORTS DONT PASS OUR IMPORTS JOBS ARE SO IMPORTANT TO THIS COUNTRY. ALSO IF THE COST OF PRODUCTS WASNT SO HIGH WE COULD LIVE DECENT.WHEN IT TAKES HALF OF YOUR PAY CHEAK TO BUY GAS JUST TO GET TO WORK,AND THE OTHER HALF TO PAY RENT OR HOUSE PAYMENT. IF WE DONT DO SOMETHING ABOUT THE PRICES OF GOODS

    WE AS A COUNTRY WIL COME TO A HALT. JUST KEEP WATCHING IT WILL HAPPEN!

  • Report this Comment On March 24, 2013, at 7:54 AM, E85Prices wrote:

    Diversity of fuel options "will save us".. It's Ethanol, Ng and electrics/hybrids

    Ethanol made from Corn has for the most part reached it's limit..(by law can only make 15 billion a year from corn..did 14 billion last year ..that's 10% of the 130 billion gallons of gasoline we use)

    The next 17 billion a year comes from field waste , wood waste , and my favorite.. Municipal Waste (yes the trash you set on the curb)

    And the beauty is you drive the same vehicles we do today..the only difference between a Flex Fuel Vehicle and a Non Flex Fuel Vehicle is the Software(database) for the Fuel Map.

    it LITERALLY costs GM less than $100 to turn a NON FFV into a FFV

    BTW.. ethanol is not subsidized (VEETC/Blenders credit expired last year) and is selling for 53 cents LESS per gallon on the Chicago Board of Trade

    Corn is selling for $7 a Bushel..(56 pounds)..12 cents a pound ..to put that in perspective you can make 1,2000 tortillas out out a Bushel(56 pounds) Cheap

  • Report this Comment On March 24, 2013, at 8:04 AM, E85Prices wrote:

    To Follow up on the Trash to ethanol path.. This is one of my Favorites.. and should be yours as well when you consider who they have a deal with.. Waste Management one of the Largest trash haulers in the World

    The Company is Enerkem http://enerkem.com/en/home.html

    First Plants are up and running.

    That's like the holy grail of fuel.. burn our waste

  • Report this Comment On March 24, 2013, at 9:02 AM, Grandpastu wrote:

    I'm certain if these companies weren't paying our Congressmen to keep the laws as they are (with respect to price controls), then nothing will be done to keep the costs down!

  • Report this Comment On March 24, 2013, at 9:03 AM, whirlybird122 wrote:

    It's called price gouging , the rich squeezing the pour . instead of investing capital they raise the price so the top exec's can get their multi million $ bonus

  • Report this Comment On March 24, 2013, at 9:15 AM, vanhellslinger wrote:

    Unfortunately one should have a great deal of technical knowledge on oil and refining, gas,and automobiles,etc to post an intelligent opinion. I would venture a guess on the fact that we are using decades old refineries and say we need a few new ones that could/maybe reduce the cost and save more fuel from oil. I see the Japanese wax is more popular for candle makers because it is a purer parafin, so wonder does it mean they refine better?

  • Report this Comment On March 24, 2013, at 9:47 AM, ghowiephartz wrote:

    It's all about politics, and we are paying. We have more oil in the US than the entire middle east. Tell the arabs to go pound sand up their a--!

  • Report this Comment On March 24, 2013, at 11:32 AM, xl500steve wrote:

    too bad the so called writer is so blind in his antioil /Electric Fallicy .........High priced high polution adjenda !.... before electric can be more than a way to BANKRUPCY CNG will rise as a major fuel as will METHANE HIDRATES as a MAJOR >>> CHEAP >>>> FUEL !!!! that will blend in WITH ALMOST NO Changes in OUR LIFESTYLE or the need for complete infrastructure change like EXPEN$IVE ELECTRIC ! go learn something REAL TYLER !

  • Report this Comment On March 24, 2013, at 1:36 PM, Deuce719 wrote:

    Several years ago Purdue University developed a pilot program that produced gasoline from pig manure. We have a major source of renewable energy by harnessing the methane produced from waste treatment plants. Sacramento Municipal Waste Treatment Plant uses the methane they generate from their sludge digester system to power it's hydronic system(heating and cooling systems) and it was flaring(burning) 3 times as much methane as it used. Thiss was in the late 70's. Why isn't our "Energy Department" pursuing ways to capture this resource.

  • Report this Comment On March 24, 2013, at 1:42 PM, boatmoter wrote:

    Bull spit!!! the oil companies have been exporting USA oil since the 40's,they still do today in order to control price and demand,they hike the price of the oil to make up for less sales than before due to fuel efficient vehicles,when a tanker fuels up in the middle east that oil is bought and sold over 15 times by wall street which hikes the price even more, now the oil companies add Ethanol to the fuel claiming it will make more oil,but all it does is reduce the fuel mileage of a vehicle that gets 35 MPG to a vehicle that now only gets 26 MPG, it helps them sell more fuel to make up for the loss of sales they had in the 60, 70, & 80's,+ the oil companies have to have a much larger profit than the year before, it don't matter how much they drill and pump,it will always be exported to control price at the pump,wall street causes the price at the pump to fluctuate as it has been doing,what we need is no more speculation on oil and no more exporting oil and a law to stop any gouging that may occur over the change,I was a gas pump attendant in the early 70's after school, gas was 18.9 from 1968 to 1974,for that you got your windshield washed,tires checked and aired up,all fluid levels checked even for 50 cents worth of gas and there was no such thing as self service,it didn't exist,the oil today is way past ridiculous in price and it's not because of the foreign oil,it's American companies and they won't admit it either,it's the what makes them billionaires

  • Report this Comment On March 24, 2013, at 3:04 PM, ethanfrome wrote:

    3 companies that could save us from $250 oil.

    LIHEAP, AMTRAK and NJ TRANSIT.

  • Report this Comment On March 25, 2013, at 11:52 AM, ffbj wrote:

    No one cares about you, except you and yours. The government, companies, big oil, whatever, don't. We will not restrict companies from selling oil, or more properly, refined products, such as gasoline, because companies will sell to the highest bidder. So don't even bother going there. Oil is an oligopoly, congress is on the take.

    It is up to you personally with the tools available to do something about it. Ride the train as above, buy a hybrid or electric car, use less of everything, put solar panels on you house, and quit complaining, since it's a waste of time.

  • Report this Comment On March 25, 2013, at 1:05 PM, Stymie67 wrote:

    I agree with ffbj. Certainly a more enlightened and reasonable argument then the person who pathetically suggests throwing Democrats into windmills. Many of you sound like a bunch of high school girls. Quit your whining and complaining, stop being such gluttons, and reduce your footprint. There are ways, you know. And it happens that NG and EV will be profitable for investors in the future as well. That doesn't mean that oil is going away, I don't think it needs to go away for the alternatives to be relevant. I also do not agree with the primary thesis of the article. But nevertheless...

  • Report this Comment On March 29, 2013, at 11:57 PM, chaimwolff wrote:

    Lawrenceville Plasma Physics has recently published a peer reviewed paper in the focus fusion society journal. It has been reported to be the most highly read of all of the hundreds of recent papers with no dissenting views.

    They have achieved fusion temperatures of 1.8 billion degrees C previously believed to be impossible using a pulsed plasma process. This aneutronic process, is non polluting, nonhazardous and will provide charged particles directly to the grid with out the need for any intermediate steps.

    Production costs between $250,000-$350,000 are expected to result in reactors capable of supplying the energy needs of 1000 homes for more than 5 years at less than 1/10 the cost of coal. The Deuterium and Hydrogen used as the fuel are the most abundant elements in nature.

    The process will enable outlawing the production of Uranium and greatly extend the life of hydrocarbon reserves. A true paradigm shift in our energy industry is but a few years away.

    Opportunities exist for qualified investors.

    Access: www.lpphysics.com for further information.

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