“While there’s been a recent flurry of talk on reviving nuclear energy and new offshore drilling for oil,” writes our income-investing specialist Jim Nelson, “natural gas has been left in the dust -- as far as speculation goes.”
Jim cites figures that show total recoverable natural gas resources in the United States amounted to a 60-year supply in 1990. By 2006, that grew to an 80-year supply. And the key word behind that change is “recoverable.”
“Recoverable,” says Jim, “just means that we can access it right now, with today’s technology. In 1990, the resource finders of the day couldn’t look deep in mountains quite like we can today with 4-D seismology. They also didn’t have horizontal drilling, which makes up a great deal of recent U.S. natural gas production.
“All of these technologies have kept natural gas prices down lower than oil, which didn’t benefit from new technology to quite the same extent. But because of some very obvious facts in this country, like high energy importation, rising oil prices and an ever-growing consumption base, natural gas will have its day. And anyone invested early enough stands to benefit from this inevitable natural gas hike.
“The nearby chart shows crude oil has been climbing nonstop since the market crash in 2008. Natural gas, on the other hand, has meandered along, with a nice, but too short rally late last year.“The bottom section of that chart shows the crude oil-to-natural gas ratio during the same period. While that might not seem like much of a concern, it is.
“Historically, that ratio sits between 6- and 8-to-1. Today, that’s at around 22-to-1. That means it takes about three times as much natural gas to buy a barrel of crude oil now than it did in most of recent history. That’s a very positive sign that natural gas is cheap compared with crude.”
The stand you took here is worth a praise. Crude oil and natural gas trend is up because of demand and supply. energy demand gain and supply may cut.
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