Best Buys for Natural Gas Boom Future
U.S. natural gas production has sky rocketed in the past year. Our natural gas production is leading the way and the shale boom has been a big contributor to this. Natural gas prices haven’t been too dynamic, but the use of natural gas has definitely increased. I have a feeling the boom is going to hit soon, and Kurt Brouwer agrees, and explains why.
The Golden Age of Gas
Earlier this year, a piece in The Wall Street Journal made this point:
The increasing abundance of cheap natural gas, coupled with rising demand for the fuel from China and the fall-out from the Fukushima nuclear disaster in Japan, may have set the stage for a “golden age of gas,” the International Energy Agency said Monday.
Under a scenario set out by the IEA, global consumption of natural gas could rise by more than 50% over the next 25 years, with it accounting for more than a quarter of global energy demand by 2035, up from 21% now…
A Natural Energy Source
Right now, natural gas is the energy source of choice for large power plants and industrial applications. Many power plants use coal, but natural gas is a cleaner energy source than coal so it should gain market share over time. Other applications such as home heating and cooking are well known. It is rarely used as an energy source for transportation, except in a few specialized applications, but there is no reason it could not used very effectively for powering cars and trucks.
As you may have guessed by now, I think natural gas has a great future as an energy source. In fact, I think we could be on the verge of a golden age for gas. In other words, natural gas consumption should increase and, if it ever makes the leap into broad transportation use, consumption could soar.
Investing in Natural Gas
Most of the large integrated oil companies have natural gas assets, so that is one obvious way to invest. Here is a list of several funds or ETFs that invest in oil and gas production and exploration companies:
- First Trust ISE Revere Natural Gas (FCG)
- iShares Dow Jones U.S. Oil & Gas (IEO)
- SPDR S&P Oil & Gas (XOP)
- Vanguard Energy ETF (VDE)
- FBR Gas Utility Index (GASFX)
- Vanguard Energy Fund (VGENX)
The advantage of these ETFs or mutual funds is that they primarily invest directly in companies that produce oil and natural gas and engage in related activities. Being funds that invest in stocks, they are easier to understand than energy fund that invest in futures contracts and other derivatives. But most are a broader energy play than just investing in natural gas alone. That means most of these funds are not pure plays, but they certainly have lots of exposure to natural gas.
As you may have noticed, my list above did not include the U.S. Natural Gas Fund (UNG). I have written about this ETF before, and for a variety of reasons, I do not recommend it. Click here for lots of in-depth coverage on problems with futures-based commodity funds.
Natural gas has been put on the map due to increase production and usage. If prices can begin to follow suit and increase as well, you natural gas investors will be in great shape. I have a feeling this boom is going to happen soon. Be ready!
Quotes taken from report by Kurt Brouwer, Read the entire article here.
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