DENVER—“All the advances from energy exploration and production are the key growth engine during this unusual time in the history of the U.S.,” said Jeremy Friesen, a Morgan Stanley commodity trading group strategist. “This is unlike most times when you have a positive supply stock or an economic growth story, when it’s usually spread out and shared with the global community.”

Friesen shared his views at the November meeting of the Energy Finance Discussion Group in Denver.

“This isn’t being or hasn’t been shared globally,” he said.

“The shale oil revolution has been an incredible event for oil markets. It would be hard to speculate where oil prices would be without the increased U.S. supplies and the disruptions we might have seen with events such as civil war in Libya or ISIS selling oil to Turkey, but certainly they would have been much higher than they were even in 2010.”

According to Friesen, “The U.S. economy has been on a three-year tear because other countries want U.S. dollars. The Chinese are wanting to and willing to pay a premium to get their hands on something in the U.S., whether it be investment in U.S. shales, or midstream operations.”

Friesen showed statistics of the U.S. dollar’s appreciation and how the U.S. trade balance has improved. “We’re importing less and exporting more. There’re secondary and tertiary events like hotels being built in North Dakota and lots of new homes being built in Louisiana.

“So instead of lower energy prices helping driving demand for Chinese goods, the Chinese are investing their money in building factories in Texas and Louisiana. It’s only focused on the U.S. The energy boom here really hasn’t helped everyone globally.”

However, Friesen believes that the international recovery from the worldwide recession will continue, as will growth in developed economies and emerging markets.

Consumers are doing well, while producers, as far as capital accumulation, are more challenged right now. “This could set up a drift in the supply/demand balance,” Friesen said.

Another factor is low investment since the recession. Even in the U.S., where energy has been a key investment for portfolios, the energy industry has seen cuts in capex spending, according to Friesen. Five years past the recession, commodities are oversupplied and likely to continue that way because of low interest rates. But even though there has been growth, the commodity markets have balanced themselves.

Other signs of international recovery, such as reformist elections in Mexico, Indonesia and India, can be seen. These events and others should help the global recovery through 2016, Friesen stated.

The Euro Zone still needs some stimulus, he said. “The EU is at its limit, and Germany should be in a much better place to seek compromise. Next year will be better.”

Regarding Asia, Friesen said that China has been bearish and the government is trying to shift the economy away from production and consumption. “During this recent growth period, it’s actually been the industrial side and the export side that have driven the economy.”

Looking ahead, Friesen said that India is an “underappreciated risk over the next decade. It’s going to be the biggest country in the world in a decade population-wise. There will be 35% more people under that age of 25 than China. India has a stronger current growth rate.

“If you look at where China was 12 years ago and where India is now, you’ll see a number of similarities.”

In the early 2000s, China followed a path of higher organization and manufacturing that built an investment environment. India is positioning itself along the same lines, Friesen said.

“If you look at current statistics India is falling in the same cycle, but trending a higher pattern than China did 12 years ago. China didn’t matter until it mattered, and then it mattered a lot.”

Friesen mentioned that other major commodity producers such as Brazil and Russia face dramatically different near-term growth paths with deteriorating investment environments. According to Friesen, some observers have warned that Russia could lose 20% of its oil production through 2017 owing to these issues.

“The economic sanctions against Russia are already affecting the country. Lukoil said that if sanctions continue, it could decrease their oil output by about 20%. The central bank believes that the sanctions will go on until the end of 2017.”

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