September 17, 2012
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The last year has repeatedly had us asking just how low natural gas can go, with each short-lived surge leaving us hopeful that we’ll see the return of volatility that once drove the market and provided ample opportunities in the managed futures space. Time and time again, though, we find the market reverting to the downward trend, fueled by ample supply and limited distribution opportunities that quash demand. However, a debate in the Wall Street Journal highlighted the chance for a substantial change in the game – the looming decision from the U.S. Department of Energy on whether or not we can export our supply in the near future:
Shipping natural gas outside North America can’t occur without a green light from the U.S. Department of Energy, which isn’t expected to weigh in on the issue until after the November elections.
In the meantime, the debate has split into two camps. Supporters see little negative impact and, on the contrary, benefits for U.S. political influence abroad. The other side argues, among other things, that natural-gas exports are likely to give rise to an international cartel similar to OPEC which would compete with U.S. exports and put further pressure on the U.S. economy.
The article covers a variety of concerns pertinent to the decision (read here), but it seems as though the biggest question is whether we want to capitalize on the surplus now, or later. While advocates argue that the surplus is large enough for us to take on several projects with strategic allies, providing us with more global sway and thousands of jobs as they launch, the flip side is that by keeping the supply at home, we have the ability to potentially create more jobs through a focus on creation natural gas based products for export, like liquid fuel methanol, which helps fuel alternative energy vehicles. The problem is that the production of such goods, in a substantial manner, would require further investment into the plants that refine them, and a demand for the products themselves – both pieces of the puzzle which may still be decades in the making.
Either way, the decision has the potential to impact the market dramatically. Natural gas has long been a market that goes big or goes home. In a world where the export ban remains, the market could drop much lower. In a world where it is lifted, we could see the market surge. Regardless, it’ll be a move worth watching for.
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September 17, 2012
Interesting comparison between the BTU’s of Natural Gas and Gasoline posted on Wikipedia here: https://en.wikipedia.org/wiki/Gasoline_gallon_equivalent. Long and short – NG might be a solution for some uses, but is not the likely savior for dependence on gasoline.