The overabundance of natural gas in North America has been revolutionizing the economy and the energy industry, all thanks to the massive shale formations being discovered across the country. The demand has remained high while the supply is even higher, and prices hit a 10-year low in April 2012.
But cheap natural gas is not here to stay.
Energy demand is trending up at an all-time high, and within the next few years, we are going to be seeing emerging countries desperate for energy and looking to buy it cheap. According to Exxon Mobil Corp.'s Outlook for Energy, emerging markets will have a 65% rise in energy demand from 2010 to 2040.
Right now, natural gas is single-handedly taking on coal to meet the world's electricity demand. The EIA reports it has become even more pronounced in the last year or so.
In U.S. power plants in 2012, natural gas usage increased to 30.5% of total electricity generation from 24.8% in 2011, while at the same time coal's contribution dropped from 42.2% to 37.5%. This trend indicates changes in the future of energy consumption.
But if you needed any other reason to stay bullish on natural gas, here is another…
Natural gas is where the money is.
There are many ways to make your money on the coming natural gas surge, but here are two safe ways:
Look into investing in an exchange-traded fund, or ETF. This is an investment fund that is similar to a mutual fund but trades like a stock on the exchange. It tracks commodities, an index, or even a group of assets.
Asset-holding ETFs can be specific to a single industry, such as natural gas. And the largest natural gas ETF is the U.S. Natural Gas Fund which is traded on the NYSE Acra exchange under the symbol UNG.
The fund has been trading for almost six years. Nearly half of UNG's holdings are within futures contracts on natural gas. If there's one ETF emerging from the recent natural gas surge in demand, it's this one.
The other way to take financial advantage of natural gas is by simply investing in individual companies and their stocks.
When doing so, you'll want to find companies that have stakes in a lot of the natural gas developments popping up and that are invested in major shale formations.
Here are a few company stocks that you can look at:
Chesapeake Energy Corporation (NYSE: CHK)
This company, with nearly $12 billion market valuation, leads the way in the acquisition, exploration, development, and production of natural gas and oil in the United States. It holds interest in a vast span of natural gas shale formations from the Haynesville (Louisiana) to the Marcellus (Pennsylvania) and all the way down to the Barnett (north Texas) and the Eagle Ford (south Texas).
SandRidge Energy, Inc. (NYSE: SD)
This independent natural gas and oil company explores and produces around the Mid-Continent and Permian Basin as well as West Texas Overthrust (WTO), Gulf Coast, and Gulf of Mexico. It has interests in over 225,000 acres and 7,350 potential drilling locations in the Permain Basin and 1.75 million acres and 8,000 drilling locations in the Mississippian.
Clean Energy Fuels Corp. (NASDAQ: CLNE)
With a focus on alternative fuel for vehicle fleets in the U.S. and Cananda, this company supplies compressed natural gas (CNG) and liquefied natural gas (LNG) fuel for medium- and heavy-duty vehicles. It's currently working on America's Natural Gas Highway, a network of 150 LNG fueling stations on major trucking highways across the U.S.
One company outside of U.S. borders that is getting the world's attention is the massive, Russian-based Gazprom (MCX: GAZP). The company is the largest extractor of natural gas in the world and produces 15% of worldwide output and 78% of Russia's alone. Bloomberg ranked Gazprom as the third best-performing global energy company in the world after Exxon Mobil and Chevron.
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