Until now, the media’s attention has been fixated on the fight between natural gas and coal.
Certainly, I understand their fascination with this internal battle. The sheer number of new natural gas plants coming online is enough to make a miner shutter deep inside a West Virginia mine.
But truth be told, it isn’t just coal’s share of U.S. electrical generation that the natural gas market is after…
That’s only one front in this domestic energy war.
We can boil the battle of coal and nat gas to the natural gas industry’s new mantra: “It’s us versus the world” — and in no place is this becoming a reality more than California.
Natural vs. The World
For proof of natural gas’ all-out attack on other energy sources, look no further than California’s decision to shut down a number of its nuclear power plants — the latest being Southern California Edison’s San Onofre plant.
The reason for the closure revolves around cost. The news came after the company said it wasn’t about to spend an exorbitant amount of cash fixing equipment. And the fact that natural gas is still dirt cheap isn’t helping matters.
So the Golden State is turning to natural gas.
But is this really some new-found love for nat gas for California?
Forecasting an Addiction
The answer is a resounding ‘No!’
California has had an addiction for natural gas for years, and their dependence on the fossil fuel is about to grow even more.
Now, it’s important to note that despite natural gas playing a major role in the state’s energy consumption, demand has been relatively flat for decades (click chart to enlarge)…
Still, Californians are certainly using more than their fair share of U.S. production.
Let’s take a second and to look at how much U.S. natural gas is being delivered to the state for consumption…
For vehicle use, the state accounts for about one-half of natural gas deliveries (click image to enlarge):
In the electric power sector, which makes up nearly 40% of total U.S. energy consumption, California accounts for 11% of natural gas deliveries.
Naturally, this growing reliance on natural gas provides a window of opportunity for us — if you know where to look.
Focus on Opportunity, Not Price Spikes
It’s vital that we don’t mistake “want” for “need” in this case.
The painful truth here is that California needs natural gas.
(Let’s not indulge any fantasies about sun and wind being the driving forces behind this, because one-fifth of the state’s electrical power actually comes from hydroelectric production.)
The clear energy of choice is natural gas — and it accounts for more than half of the state’s total electrical generation.
Contrary to popular belief, the long-term value for us in natural gas isn’t from a sudden, massive spike in prices.
I recommend taking a different approach…
Both you and I know that the supply glut created by developing our shale gas formations will ensure natural gas prices remain relatively cheap. According to the EIA, it’ll take at least three decades we see natural gas prices rise above $8 per MMBtu again.
Why not use this slow and steady price appreciation to your advantage?
Rather than trying to roll the hard six, the best natural gas investments between now and 2040 won’t be the ones pumping it out of the ground…
As my colleague Christian DeHaemer explained to me, there’s a select group of natural gas plays in today’s market that will profit — even if prices collapse, like they did between 2008 and 2010.
The most intriguing part about the companies Chris has found is that they’re laying the groundwork for our growing dependence to natural gas, yet none of them produce so much as a single cubic foot of the stuff!
Until next time,
A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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