{"id":37265,"date":"2013-04-02T21:37:29","date_gmt":"2013-04-03T01:37:29","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37265"},"modified":"2013-04-02T21:37:29","modified_gmt":"2013-04-03T01:37:29","slug":"the-fuel-of-the-future-isnt-oil-its-natural-gas","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/02\/the-fuel-of-the-future-isnt-oil-its-natural-gas\/","title":{"rendered":"The Fuel of the Future isn\u2019t Oil \u2014 It\u2019s Natural Gas"},"content":{"rendered":"

By MoneyMorning.com.au<\/u><\/a> <\/p>\n

The panic over Cyprus<\/a> has kept all eyes on the Mediterranean in recent weeks. The snatching of bank deposits may have marked another major turning point in the saga of the eurozone<\/a>. <\/p>\n

But this weekend, the Med played host to another major development \u2014 a far more positive one \u2014 that hasn\u2019t drawn quite as much attention.<\/p>\n

Israel started gas production<\/strong> at the Tamar field in the eastern Mediterranean Sea. According to Bloomberg, there\u2019s enough gas under the Med \u2018to supply the country for 150 years\u2019<\/em>.<\/p>\n

The country could even become an energy exporter in the future, selling liquefied natural gas (LNG)<\/a> around the world.<\/p>\n

It\u2019s all part of the energy market revolution \u2014 and it\u2019s a trend you should be looking to profit from.<\/p>\n

Remember When Oil Was Cheap?<\/h2>\n<\/p>\n

It\u2019s hard to remember now, but at the end of the 1990s, oil was dirt cheap<\/strong>. The notion that the price would ever rise to the lofty levels of $50 a barrel was seen as nothing short of ludicrous. $100 a barrel wasn\u2019t even on the radar.<\/p>\n

Most people hadn\u2019t even heard of \u2018peak oil\u2019 theory<\/strong>, which at the time covered almost any concern that oil might just run out at some point. Those who peddled the idea were dismissed as nothing more than gibbering conspiracy theorists.<\/p>\n

As so often happens, conventional wisdom proved to be entirely wrong. The trouble with a commodity being cheap is that there\u2019s not much incentive to find more of it. And you can\u2019t just turn the tap on and off. Even when prices begin to tick higher, ramping up production takes time.<\/p>\n

So oil prices boomed<\/a>. China\u2019s rampant growth was one big factor. And all the cheap money being pumped around global markets didn\u2019t help. Even in the big oil crash of 2008, prices only dipped below the $40 mark for the briefest period of time, before rebounding sharply.<\/p>\n

The financial crisis put an end to oil\u2019s rampant bull market. The 2008 high of around $140 a barrel of Brent crude is intact. But the price remains very high by historical standards.<\/p>\n

And these days, \u2018peak oil\u2019 is practically accepted wisdom. You\u2019ll hear it spouted in its most watered-down form by talking heads on CNBC. In essence, this boils down to: \u2018all the cheap oil has been found\u2019<\/strong>.<\/p>\n

It\u2019s an interesting point. It may even be true.<\/p>\n

But it ignores one key fact about markets and human nature. If something gets expensive, two things happen. Firstly, producers try to produce more of it. Secondly, users try to find substitutes.<\/p>\n

In short, supply increases and demand drops.<\/p>\n

In some markets, this happens faster than others. It takes longer to establish a new copper mine, or to develop affordable deep-sea drilling technology, than to grow an extra field of corn, for example. But it does happen.<\/p>\n

And this is why we suspect that oil\u2019s best days are behind it<\/strong>. Investors should instead focus on the commodity that will increasingly act as a substitute for oil \u2014 natural gas<\/strong>.<\/p>\n

More Industries are Increasing Their Natural Gas Usage<\/h2>\n<\/p>\n

There\u2019s an interesting column in the Financial Times<\/em> from Seth Kleinman, Citigroup\u2019s global head of energy strategy. He notes that cars accounted for about 22 million of the 87 million barrels of oil used each day in 2010.<\/p>\n

That\u2019s a big chunk of oil demand<\/strong>. And it may continue to increase as emerging market<\/a> consumers become wealthier, and drive more cars. This in turn tends to be the key argument of the oil bulls. \u2018More money, more drivers,\u2019 goes the logic.<\/p>\n

However, what the bulls miss is that the sectors that use up the rest of that oil are \u2018using more and more natural gas\u2019<\/em>. In fact, \u2018the prospect of oil demand hitting a plateau this decade is much more feasible than the market seems to think\u2019<\/em>.<\/p>\n

Logistics companies are converting fleets to run on natural gas<\/strong>. Oil explorers are doing the same with drilling rigs. Meanwhile, car manufacturers are under pressure to make cars ever more economical. \u2018New vehicles\u2019 fuel economy is increasing by about 2.5% a year,\u2019 enough to \u2018significantly cut the expected growth in global oil demand \u2014 and, of course, oil prices.\u2019<\/em><\/p>\n

Barring geopolitical disasters \u2014 which tend to be short-term events in any case \u2014 the oil price <\/a>is unlikely to embark on another bull run of the type we saw in the run-up to 2008. Instead, it\u2019ll either be broadly static, or it will decline.<\/p>\n

John Stepek
\nContributing Editor, Money Morning<\/em> <\/strong><\/p>\n

Join Money Morning on Google+<\/u><\/a><\/strong><\/p>\n

Publisher\u2019s Note<\/em>: This article originally appeared in MoneyWeek <\/a><\/em><\/p>\n

From the Archives…<\/strong><\/em><\/p>\n

Why Dividend Stocks May Not Stay This Cheap for Long<\/a>
\n29-03-2013 \u2013 Kris Sayce <\/p>\n

Respect the Market Trend, but Don\u2019t Expect it to Last<\/a>
\n28-03-2013 \u2013 Murray Dawes <\/p>\n

Silver \u2018$100 Within Two Years\u2019<\/a>
\n27-03-2013 \u2013 Dr. Alex Cowie <\/p>\n

11 Billion Reasons to Expect a 200% Move in Gold Stocks Within Months<\/a>
\n26-03-2013 \u2013 Dr. Alex Cowie <\/p>\n

You Want Proof the Stock Market\u2019s Heading Up? Try This…<\/a>
\n25-03-2013 \u2013 Kris Sayce <\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au The panic over Cyprus has kept all eyes on the Mediterranean in recent weeks. The snatching of bank deposits may have marked another major turning point in the saga of the eurozone. But this weekend, the Med played host to another major development \u2014 a far more positive one \u2014 that hasn\u2019t drawn … <\/p>\n

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