2. THE KAHUNA'S RANT O' THE WEEK: While The Environmental Lobby
Freezes This Winter, I'm Getting Rich! -- By Tobin Smith
Greenspan couldn’t tell you this yesterday because he would’ve
caused a national panic. But I’m going to make no bones about it.
I believe ChangeWave Research has enough evidence now to make the
following statement: Investors in the right spaces in companies in
the natural gas industry will be able to turn $100,000 into $1
million by 2005-2006.
I do not make this statement lightly. I expect these stocks to
double during the next 12 months as natural gas prices explode to
$12-$15 per 1,000 cubic feet in the Great Gas Shortage of 2003-
2004. And then double again into 2005-2006.
You see, $6 per 1,000 cubic feet (or mcf) of natural gas is the
equivalent of $36 per barrel oil -- do the math. Owning gobs of
natural gas reserves at a cost of less than $1.50 per mcf in a $12
per mcf gas world is like owning the entire water supply of Saudi
Arabia. That’s the equivalent of $72 per barrel oil -- do you think
you could get just a little rich selling all the $12 gas you can
when it costs you $1.50?
Why am I so confident in this gigantic ChangeWave of gas
demand/supply imbalance --and why have I invested my own money in
this trend?
Because the research I’ve done on the natural gas crisis that is
coming to the U.S. this summer and next winter allows me to know
what Mr. Greenspan COULD NOT SAY yesterday in his congressional
testimony.
Why couldn’t he tell the whole story? Because gas would be $15 per
mcf today if he did, and he would panic the entire economy into a
frothing lather.
But that’s not a risk here, 99.99% of investors and business people
in the U.S. will never see our exclusive report, “The Natural Gas
Crisis of 2003-2004.”
They will not read this WaveWire or subscribe to our proprietary
research and stock recommendations. But you are luckier. You’ve
read this far -- don’t stop.
THE THINGS A.G. COULDN’T SAY
Here are the main issues that Fed Chairman Greenspan could not
address yesterday during his speech before a congressional
committee.
GREENSPAN SAYS: A.G. predicted tight supplies of natural gas and
high prices for a prolonged period on Tuesday, largely because --
unlike oil -- the U.S. market is unable to draw on world gas
supplies easily. "We are not apt to return to earlier periods of
relative abundance and low prices anytime soon," he said.
REALITY: We will run about 1 TRILLION cubic feet of gas short for
the upcoming winter, and short of a weather-related miracle, there
is NOTHING we will be able to do about it.
The reason? The environmental lobby has all but insured a
supply/demand imbalance in gas for the next five years at least.
The math says it all.
The natural gas industry put 1.5 trillion cubic feet in storage
last year. In the U.S., we consumed 2.5 trillion cubic feet during
the winter. And last winter was statistically NORMAL, even though
it felt as cold as hell in many places.
So the trillion-dollar question is, “How do we get to 2.5 trillion
cubic feet of gas in storage by November when we only added roughly
1.5 trillion last year?”
Answer: It’s impossible. We have ZERO chance of making up the
difference. Given that storage increases start to slow down in
September and October, the gas market needs to put 120 billion
cubic feet a week into the ground between now and the end of June.
Yet actual production of new supply is down 4%-5% this year, and
last year we could only get 1.6 trillion cubic feet into storage.
We are screwed and Greenspan knows it.
GREENSPAN SAYS: A.G. testified that the markets are anticipating
natural gas prices of more than $6 per 1,000 cubic feet well into
next year. This means market expectations "imply a 25% probability"
that the peak price natural gas on the wholesale market exceed
$7.50 per 1,000 cubic feet by next January, in the middle of the
winter heating season. The Energy Department previously noted that
extremely short supplies of natural gas in storage would result in
high prices to continue through this year and into 2004.
REALITY: If we have a normal summer and winter, gas prices in the
spot market go to $12-$15 easily and stay there. Why? Look at the
weather forecast for the Eastern U.S.
Accuweather forecasters see a big change from our unusual
spring: "Air-conditioning use in the big cities of the Northeast
and Midwest will soar next week as above-normal temperatures sweep
in from Mexico and the Great Plains to break an eight-month cold
spell.” One meteorologist from the service says the warmth
is “going to shock people.”
As temperatures return to more summer-like conditions, it will
usher in hot weather for the remainder of spring and summer
according to weather forecasters surveyed by Bloomberg News. The
heat, which will range from 0.5 to four degrees Fahrenheit above
normal through August, will boost demand for electricity to cool
buildings, homes and factories. That will strain already-low
reserves of natural gas, heating oil and other power plant fuels.
Now the kicker is that the power plants on the east coast will be
forced to use natural gas in many areas due to the environmental
lobby, which pushed through a law years ago that these plants MUST
use natural gas to produce electricity starting in May due to
restrictions on CO2 emissions.
GREENSPAN SAYS: Can’t we just conserve our way to balance?
Greenspan said the supply and price problems stem from a "modest
gap" between growing demand for the environmentally friendly fuel
and supplies that are limited. "Rising demand for natural gas,
especially as a clean-burning source of electric power, is pressing
against a supply essentially restricted to North American
production," he said.
REALITY: Electric power generation fueled by natural gas has pushed
consumption in the power industry from 9% to 27%. And most of those
power generators can’t switch to oil or other oil distillates.
A hidden little secret is that almost ALL of the 100-plus new power
plants built since 1990 can ONLY use natural gas because:
* They are only permitted for gas
* They cannot run economically on oil even if they are permitted to
do so
* They cannot run on oil because they don’t have the pollution
credits necessary to use that option
Around 75% of ALL new houses built in the U.S. during the last 15
years are heated and cooled by natural gas. This conversion was
made largely as a result of regulations and incentives to use gas
vs. electricity.
A group of 29 Democratic senators recently wrote Energy Secretary
Abraham urging him to "take steps to promote increased conservation
to try to curtail gas demand this summer."
What are we going to do -- tear out our central heating and cooling
systems and replace them with ice machines?
WHAT ABOUT FINDING MORE GAS?
Can we just add more drilling rigs and drill our way out of this
mess? Not a chance.
The government expects an overall 2% decline in production compared
with last year. The number of drilling rigs has increased about 22
% from a year ago, but remains below the number in operation in
2001.
The problem is it takes at least six months for the increase in rig
count to turn around production increases. Increased production in
October and November comes TOO LATE to help this problem. That
production will not get stored -- it will get consumed.
And this does not even take into consideration that exploration of
new domestic sources of gas has been extremely difficult and costly
because of environmental regulations and deeper drilling by rigs
producing in the much harder to drill areas in the Gulf of Mexico.
Bottom line: It will take years, not months, for the industry to
produce enough new sources of gas to keep pace with demand.
WILL HIGH PRICES DESTROY DEMAND?
So, you have to wonder if increasing prices will crush demand for
natural gas and help rebuild storage supplies.
Sorry, my research shows the we would need to see demand 6%-7%
LOWER than last year in order to make up our storage disaster.
There are several factors that make that seem unlikely:
* Current regulations AGAINST using alternative power
* Heating oil reserves are down 32% from a year ago
* Gas-fired power plants account for 15% of U.S. electrical power
generating capacity
Even with the amount of electricity produced from oil-based fuels
this year expected to grow by 28% as these generators replace gas,
it is simply too little, too late.
We are on a treadmill that is running faster than we can walk, and
we are falling farther and farther behind.
According to the Energy Department, homeowners consumed 26% of U.S.
gas supplies last year. Industrial users consumed 44 %, utilities
used 12 % and commercial users accounted for the remainder.
Consumption by industry is already down 27%, according to
government sources. Unless we close every chemical, plastic,
ammonia and steel plant in America, we lose.
ANY hurricane or long hot spell this summer deepens the crisis. A
big winter in 2004 (which the Farmers’ Almanac is calling for) and
$15 mcf gas will be with us for MUCH of 2004 until the government
finally lifts the environmental restrictions we need to get the gas
we already have.
But even if we lifted 100% of the restrictions today, it would take
five to seven years before supply meets up with demand. And
ChangeWave Investors will have literally made fortunes riding this
once-a-century natural gas wave.
I say getting rich is the best revenge against the environmental
tree huggers who got us in this mess. Are you in?
Toby
P.S. If you want to uncover ways to profit from the Natural Gas
Crisis of 2003-2004 and read our new report on the topic, sign up
for a risk-free trial of our ChangeWave Investing service by
following the link below:
changewave.com
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Rock on boyz & girlz! |
