News Column

Five Questions with Energy Analyst Brian Youngberg

Aug 24, 2012

Jeffrey Tomich

Following the global energy markets these days -- from OPEC, to the shale gas boom, to alternative energy, to zig-zagging petroleum prices and shifting government policies -- rarely leaves an idle moment.

It's quite enough to keep Brian Youngberg busy as a senior analyst covering energy and utilities for Des Peres-based brokerage Edward Jones.

A native of Omaha, Neb., Youngberg joined Edward Jones in 2000 to follow the utility industry and in 2006 turned his focus to the petroleum industry, including companies such as BP, Chevron and Exxon Mobil.

Youngberg sat down with the Post-Dispatch to discuss energy market trends. An edited transcript of that conversation follows.

With efforts to reduce petroleum dependency, will U.S. oil consumption ever surpass pre-recession levels?

I've been saying for quite a while that we will not get back to 2007 oil demand levels. We're driving more fuel efficient cars. We are using more biofuels. There's a longer term trend, too: We're an aging population and as you get older you tend to drive less. People are buying more cars and car sales are up right now, but they're replacing cars that are less efficient. It is a definite trend.

Oil prices soared to $145 in 2008 and crashed back to mid-$30s during the recession. They've mostly bounced from $80 to $120 over the past two years. Over the next six months, are odds higher that they'll rise or fall from current levels?

I would lean toward prices moving higher in the next few months. One issue is obviously the Iran situation that's putting upward pressure, especially internationally. I don't think that issue is going away, and it may actually come to a head here in the next few months.

I think you're going to see the global economy continue to stabilize. Europe has left the headlines at least for the time being.

If things improve, which I think they will, I think you'll see some movement in oil prices.

In terms of energy policy, what do you see as the outcome of the presidential election?

In the near-term, I don't think there will be a major impact. A Romney presidency would likely de-emphasize alternative energy to some degree. At the same time, there are state measures that require a certain amount of alternative energy. So even if they de-emphasize it, it won't impact it tremendously.

They will try to provide more support for domestic oil production but oil production has been growing under the current administration. So the big picture, companies are going to invest in what makes sense economically, and whether it's here in the U.S. or internationally.

Domestic oil production is up again this year. How much further will it continue to rise and what are the implications?

We're at about 6.5 million barrels a day right now and we'll probably hit 7 million in the next couple years. How high we go? A lot depends on prices and technology. We will not become oil independent. I don't see that happening in the foreseeable future, but what we can do is we can eliminate some of the less stable and less friendly countries that we import from.

I think what you're going to see in the next several years is we're going to be down to three countries that we import oil from. That's Canada, Mexico and Saudi Arabia. We can eliminate Venezuela, less stable countries in Africa.

Natural gas prices remain very low -- below $3 per million cubic feet. How much longer can this last?

What's keeping it this low is demand that has not kept up with supply. Supply has grown tremendously with all the natural gas shale production. That has gone on during a recession and a slow recovery. What we have seen this year is the acceleration of its use for power generation. And the hot weather we've seen this year has helped. In April, usage of natural gas for power generation roughly equaled that of coal. That's the first time ever that that has occurred.

I don't think natural gas is going to pass coal on a consistent basis but it has obviously had an impact. I think prices will continue to move up a little bit. I think next year $3 to $3.50 is reasonable to expect on average, and $4 or a little bit better in 2014. Five to six dollars is our long-term outlook, but that may be another three to four years.

Brian Youngberg

Age: 49

Title -- Senior Analyst -- Energy & Utilities, Edward Jones

Education -- BA, University of Nebraska at Omaha; MBA, Washington University

Career -- Vice President, Fitch Ratings; Vice President, Bank of Tokyo-Mitsubishi

Personal -- Lives in Wildwood with his wife and four daughters

Source: (c)2012 the St. Louis Post-Dispatch. Distributed by MCT Information Services

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