Will the U.S. Dominate Natural Gas in 2018?
Don’t get me wrong; renewables are the end game in energy production, without a doubt.
But right here, right now, they’re not everything the media makes them out to be.
Take a few of our own examples, for instance:
- Tesla’s massive solar farm that’s running a small island... and relying entirely on batteries to do it.
- Berkshire Hathaway and General Electric investing billions in wind... in addition to the data collection tech that’s going to hopefully find out what’s wrong with it.
- California, the clean energy capital of the U.S., plans to be running on 100% renewables by 2045... but it’s a stretch since it isn’t even on track to hit its original goal of 50% renewables by 2030.
These are signs of a slowdown in wind and solar development, one that’s making investors in the energy industry a little skittish.
Believe it or not, that’s what we want to see right now.
The truth is that we really don’t want to see renewables take over too fast... and certainly not before they're ready to.
You see, the fundamentals just don’t work out that way.
Germany, for example, has installed so much wind and solar that it can run on 95–100% renewable energy on a good day!
Yet those energy prices are around three times as expensive as they are in the U.S.
Other countries across the EU have taken advantage of as much as $750 billion in green energy handouts, only to see energy prices double in response.
These problems are caused by the intermittency of renewables. It’s just too much for today’s aging energy grids to handle, and it ends up coming out of the pockets of energy consumers and investors alike.
So while the renewable industry figures itself out, here’s a better opportunity waiting to break...
Buying the Glut
It should be clear by now that natural gas has solidified itself as the world’s transition fuel for more than a decade.
It’s cleaner than coal and more reliable than renewables.
As an investment, it’s one of the more lucrative fossil fuels.
Countries all over the world are installing more natural gas capacity to replace aging coal and nuclear plants, so demand has seen some healthy growth over the past few years.
There’s just one problem: the glut that has plagued the market for almost a decade. And if you don't think that poses a serious issue, just remember the oil glut that persisted between the summer of 2014 and February of 2016.
And yet natural gas is in a far better position than oil ever was.
For one, there’s no global cartel in charge of keeping prices steady (yet!).
Also, much like crude oil, we're talking about a fuel with seasonal peaks.
For the last two weeks, natural gas prices were bolstered by higher demand expectations as Winter Storm Stella threatened (then struck) the northeastern United States:
As the natural gas glut begins to ease going into 2018, it means investors like us could be staring at a serious buying opportunity this year.
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U.S. Gas Dominates
The U.S. LNG market is taking off right now, despite the glut.
This month, premier LNG exporter Cheniere Energy will be bringing online the third of six liquefaction trains at the Sabine Pass in Louisiana. More than 75 cargoes of LNG have left the Sabine Pass and headed to 17 countries since exports began early last year.
In total, the country has around 70 million tons of LNG per year coming online soon, with more just awaiting regulatory approval.
Because of this, another big player in the natural gas market, Enbridge Inc., has called for the U.S. to become the world’s biggest exporter by 2035!
The prospect is even more attractive given the sheer size of the United States' major gas plays — including the Marcellus Shale.
Now’s the time to start cashing in on that new title.
Until next time,
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