Tuesday, March 26, 2013

Right Under our Noses

Some revolutions occur right under our noses and become obvious only in retrospect. So it is with the vast expansion in America's natural gas production, which is rocking the energy world. As supplies become plentiful and cheap, it's impossible to appreciate how much our lives will change. Here's an example:
When the natural-gas industry grows up, it's going to realize that they don't need the power industry's transmission and distribution system. They have a better distribution system—the gas pipeline into your house. All the natural-gas industry needs is a gizmo in the basement of your house to convert your natural gas into electricity. I have no doubt that within the next 12 to 24 months there's going to be a technological breakthrough. (David Crane, CEO of NRG Energy)
Your humble observer has been following this phenomenon for several years and has dabbled in a few gas-related investments. However, they've performed poorly because the supply of gas has raced ahead of its uses. Gas prices have steadily declined since 2008 (adjust dates on chart below and hit "Refresh").


Source: tradingeconomics.com

The businesses whose stocks seem to have performed the best in recent years are those that are involved with the transportation (railroads, pipeline and shipping companies) and consumption (utilities, chemicals) of natural gas, not its production. Perhaps we should abandon our quest to make a few investment bucks off this revolution; the era of bountiful, cleaner energy is at hand, and, since we are all consumers, every one of us will be reaping its benefits anyway. © 2013 Stephen Yuen

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