A quick look at natural gaz.
Oil is not the only thing in the world's energy market. In fact, natural gas provides 24% of the US total energy consumption. You hear about oil every day in the news, but not about natural gas. They should talk about it, as it is almost as important as oil. As you can see in the graph above, (source: wtrg.com ) The natural gas prices are skyrocketing even more than oil, coming from 4.50$ to over 12$ in a single year. That is a 266% increase in one single year.
Yet, it accounts for more than 90 percent of new electricity capacity built in last 5 years in the US. 57% of the US households are heated by natural gas. It provides the energy source or raw material to make a wide range of products, such as plastics , steel, glass, synthetic fabrics, fertilizer, aspirin, automobiles and processed food. Nearly all the commercial and industrial fertilizers and pesticides are made from natural gas.
Prediction: Natural gas prices will reach 20$ during winter of 2005. This will spark high heating prices for worldwide households. This will increase the trading activities during the rest of 2006. More headlines will be on natural gas during 2006 than right now, I can guarantee that.
Storage of natural gas is very expensive. Long distance shipments also make them more expensive. U.S. production has been essentially flat for 20 years; increased imports filled the gap.
As demand grows , it will have to be shipped massively from overseas in liquefied form. It costs a -lot- to do that in every step from the liquefication process, shipping, and then you need to return it to its gaseous state. Producing countries are more likely to prefer selling the gas to neighbor countries where they can ship and establish gas pipelines.
As the US government decides to build almost all new energy plants to be reliant on natural gas, the price of it is skyrocketing. Winter 2005 is going to be tough. Winter 2006 will be hell.
posted by Jean-Yves @ 8:06 PM
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