Energized
During the past 70 years, the U.S. has become better at using less energy to produce more
goods and services. This trend is illustrated by energy intensity, as measured by the ratio of
energy consumption to GDP, which has declined 63% since 1950. This increase in productivity
could potentially help dampen the recent impact of higher oil and gas prices on the U.S.
economy and corporate earnings. With technology helping drive increased domestic energy
production, we believe, higher prices may even potentially support the economy by driving
growth in capital expenditures by energy companies.
Alger On the Money
Inspired by Change, Driven by Growth.
Alg
er is committ
ed to
sustainability and is a signat
ory
to
the PRI.
•
A lot has changed since the 1970s when the U.S. experienced an oil supply shock that drove
significant inflation. Our new digital economy is less energy dependent and we believe data is the
new oil. At the same time, automobiles, buildings and manufacturing have become more energy
efficient.
•
Energy, while being less of an input cost for companies, may even be more likely to support GDP
growth as higher prices cause energy companies to potentially increase their capital expenditures
to produce more. We believe, the increase in capital expenditure may exceed the extent to which
higher energy prices limit consumption.
•
We don’t think investors need to be overly concerned with higher energy prices crimping the
economy, but we do believe there is opportunity in growth-oriented technology providers to oil
and gas companies to help optimize well drilling and other areas of upstream exploration and
production. Additionally, as the price of solar or wind energy becomes cheaper relative to prices
for oil and gas, higher hydrocarbon prices may help spur activity in alternative energy solutions, in
our view.
Energized
During the past 70 years, the U.S. has become better at using less energy to produce more
goods and services. This trend is illustrated by energy intensity, as measured by the ratio of
energy consumption to GDP, which has declined 63% since 1950. This increase in productivity
could potentially help dampen the recent impact of higher oil and gas prices on the U.S.
economy and corporate earnings. With technology helping drive increased domestic energy
production, we believe, higher prices may even potentially support the economy by driving
growth in capital expenditures by energy companies.
U.S. Energy Intensity
Source: U.S. Energy Information Administration, Haver Analytics, Deutsch Bank. Note: Energy intensity is calculated using the
ratio
of energy consumption to real GDP.
2020
0
20
40
60
80
100
120
2015
2010
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1970=100
Fred Alger & Company, LLC
360 Park Avenue South, New York, NY 10010 / www.alger.com
800.305.8547
(Retail)
/ 212.806.8869
(Institutional)
AOM254
The views expressed are the views of Fred Alger Management, LLC as of November 2021. These views are subject to change at any time and may not represent the views of
all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by Fred
Alger Management, LLC. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.
Risk Disclosure:
Investing in the stock market involves certain risks, including the potential loss of principal. Growth stocks tend to be more volatile than other stocks as their
prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Technology companies may be
significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Local, regional or
global events such as war, acts of terrorism, the spread of infectious illness such as COVID-19 or other public health issues, recessions, or other events could have a significant
impact on investments.
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