The Most Important Global Commodity of the Decade

Ed D'Agostino
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April 16, 2024
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Comments

Have you seen the price of natural gas lately?

You’d think it’s the most unloved commodity in the US. And yet, I believe it will be the most important global commodity of the decade.

The US produces massive amounts of natural gas as a byproduct of oil production. It is so abundant that in some areas of the US, oil producers pay to have natural gas pumped from their sites.

Natural gas trades on a regional basis because it is difficult to transport. The US has 3 million miles of mainline and other pipelines, which are necessary to move gas across land, but we could use more.

Source: EIA

Converting gas into liquid (LNG) makes it more efficient to ship, but it requires cooling the gas to -260 degrees F.

Source: Cameron LNG

Natural gas is a perfect bridge to get us from where we are today to a future with more nuclear energy. As nuclear scientist Robert Zubrin recently told me, it takes roughly 16 years to permit and build a nuclear energy facility in the US. That long time frame comes from onerous regulations, not technological challenges. It may come down thanks to the Atomic Energy Advancement Act, which is sitting in the Senate. But even if we cut the time in half, we’ve got a long wait.

Relatively speaking, natural gas is clean. There are still roughly 200 coal-fired facilities operating in the United States. Some could be converted to cleaner natural gas. Outside the US, coal plants are being pushed to their limits. India is growing, and its need for power is outpacing its ability to bring new, greener sources of power online. Yesterday, Bloomberg reported the lack of alternatives is forcing India to leave large, outdated coal power plants online to meet minimum energy needs.

Cheap, abundant natural gas is a competitive advantage to US manufacturers. It’s also an elegant geopolitical tool. Producers could export our natural gas to friendly nations (or nations we’d like to be more friendly), while earning a profit by selling the commodity in the global market at higher prices than in the US. Europe needs the US to fill the void left by Russia and the damaged Nord Stream pipeline.

Puerto Rico recently added two new natural gas energy plants to provide baseload power to the island, following the destruction of infrastructure by Hurricanes Irma and Maria. New Fortress Energy Inc. (NFE) built the facilities.

Companies like New Fortress give investors a way to gain exposure to natural gas without investing directly in the commodity. They offer less risk and better protection against gas’s price volatility.

Midstream providers like Kinder Morgan (KMI) are another option. Kinder owns around 40% of natural gas pipelines in the US and 15% of storage capacity. The company moves gas from the oil fields to end users.

Natural gas can be a key input for hydrogen and ammonia production, which could lead to broader adoption of fuel cells. This could be a game changer for utility-scale energy storage. It could also be the cleanest and best alternative to both gas and battery powered vehicles. Toyota is rumored to be developing an ammonia-fueled car engine, in partnership with China’s GAC.

Are you bullish on natural gas companies? How are you investing? Please take a minute to comment in the Community. I’ll be there, happy to discuss further.

Thanks for reading,

Ed D’Agostino
Publisher & COO