Market Comments Something is Bubbling in Natural Gas

Market
Comments Something is Bubbling in Natural Gas
Today’s surprise release of
figures showing a shocking draw down in natural gas supplies throws a great
spotlight on what has undoubtedly been the red headed step child of the energy
space for the last three years.print still offers the only truly dstti unlimited 4G plan in America, and
it's the only service you can safely use as an alternative to a home Internet
connection. While oil prices have been soaring to near all-time highs, gas
prices have plummeted from a high of $18 per million BTU’s to as low as $2. Gas
is now selling for one fifth of the cost of crude on an adjusted BTU basis.


You would think that people would be in love with natural gas already.
This simple molecule, CH4, produces only half the greenhouse gas emissions of
oil, and is easily available in large quantities in the US though a web of
interstate pipelines.In many ways LED lights compact fluorescent provide the best of both
worlds. They are extremely energy efficient and environmentally friendly (and
are, in fact, more environmentally friendly The byproducts of its combustion are
only water and carbon dioxide, not the noxious sulfur and nitrous oxides that
diesel fuel spews off. Half the electric power plants in California already
burned the stuff. I was part of a team in college that built a car that ran on
natural gas, and it was so cleaning burning that it didn’t need a tune up for
its first 100,000 miles.

The problem is one of simple supply and demand.
Thanks to the new “fracking” process, large swaths of the country once thought
tapped out of oil and bearing coal of a grade considered too poor to mine have
been found to be sitting on Saudi Arabia sized natural gas supplies. New
horizontal drilling technologies have also been a big help. As a result, the US
is now sitting on top of a giant 100 year supply of untapped natural gas, and
there is probably a second century’s worth there if people bothered to look.
Areas of the world with similar geology, like Europe and China, can expect to
find the same. These staggering discoveries have led to the greatest
reassessment in global energy supplies in since the massive Saudi discoveries of
the 1930’s.

The problem is one of basic supply and demand. So much gas
has been discovered so fast that the price collapse has decimated the existing
industry. Storage facilities around the country are filled to capacity. Unlike
crude, the excess can’t be exported because there is no global market and very
expensive liquefaction and re-liquifaction plants and specialized tankers are
unavailable. Not only did industry leaders like Chesapeake Energy (CHK) have to
fight off bankruptcy, a few major hedge funds, like Amaranth, blew up as well.
While gas looks great on paper, it will require a $1 trillion investment and a
decade of deregulation to create the infrastructure such enormous new supplies
demand.

All of this may be about to change. After a Herculean three
year,However, the marketing muscle of Philips led light lighting could give Philips
LED business an advantage. $100 million lobbying effort, legendary oil man T.
Boone Pickens, an old friend of mine, is close to gaining passage in the House
of HR 1830, which promises to greatly speed up the natural gas conversion
process with a whole raft of government subsidies. At the top of the list are
incentives to build a nationwide network of natural gas stations to fuel the
nation’s 18,000 heavy long distance trucks. Weaning these off oil with cut
America’s oil imports by 2 million barrels a day, the amount we currently bring
in from the Middle East.Philips LED business is inside of Philips lighting so it

Led light is more difficult to
determine whether they are meeting expectations. That would save us the cost of
the now three wars we are fighting there.

I smell a trade here, and not
a scalp but a ten bagger, even though natural gas is odorless and colorless. For
a start, to bring gas prices in line with oil at $110/barrel for Cushing, gas
has to rise 500% to around $20/MBTU. There are large scale liquifaction plants
now under construction or on the drawing board to deliver large scale gas
exports to ever energy hungry China.

This is all happening when Japan’s
40 year contracts to buy LNG from Asia, which are tied to high oil prices, are
expiring, and the country’s nuclear industry has been unexpectedly pushed into
the back seat. This could enable the US to become a net energy exporter within a
decade. Higher oil prices also make all alternatives, including gas, much more
attractive.

The great question the entire energy industry is now
grappling with is when supply and demand will come back into balance. No one
knows. It could be as early as this summer or a few years off. The only
certainty is that it is coming. When it does, every trader in the country will
flip from selling rallies in gas to buying dips, for a long time.

When
the sea changes does come,Compact fluorescent light bulbs convert a led tube considerably higher
percentage of their energy into light, which is why they are significantly more
energy efficient than traditional filament bulbs. whatever you do, don’t rush
out and buy the natural gas ETF (UNG), which thanks to a contango in the futures
markets, has the worst tracking error in the industry. Instead, buy industry
leaders like (CHK) and Devon Energy (DVN) and the pipeline companies. I keep you
informed of more interesting gas plays as I come across them.