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This Will Be the Biggest Bull Trend in Commodities for the Next DecadeBy
Tuesday, January 11, 2011
One of the smartest, loudest, richest oilmen in America is T. Boone Pickens.
Since graduating college with a geology degree in 1951, Pickens has spent the last 60 years building a billion-dollar fortune by finding oil, putting together giant deals, and managing energy investment funds. He's the "rock star" of the U.S. hydrocarbon industry.
Pickens is now 82 years old. He doesn't need to focus on money anymore. These days, he's focused on the "Pickens Plan"... a giant push to convert a portion of the American truck-and-car fleet to burning natural gas instead of oil.
As I showed you yesterday, the government is going to crazy lengths to push the country in a "green" direction – including forcing every American taxpayer to pay for his neighbor's electric car. Part of the green movement will mean using more natural gas. But the government won't be the only driver for natty consumption... and eventually higher prices.
As I'll show you today, all roads lead to higher natural gas consumption.
If you've read my DailyWealth essays over the past few years, you know new drilling technologies have recently unlocked vast natural gas supplies in the United States. From 2003 to 2008, natural gas spent most of the time trading in between $6 and $8 per million BTUs (British thermal units)... and occasionally spiking past $13. The new drilling technologies have unleashed so much new supply, natural gas prices have plunged into the $3-$4 range.
Pickens thinks we're crazy not to burn our vast supplies of natural gas... rather than buy hundreds of billions of dollars of oil from the likes of Saudi Arabia, Mexico, and Venezuela. As he recently told Futures magazine...
We have more natural gas than any other country in the world. You are sitting here with 4,000 trillion [cubic feet of] natural gas, which is equivalent to 700 billion barrels of oil, which is three times what the Saudis have. You are honestly going to look like a fool if you sit here and ignore what you have available to you and you don't use it.
The Pickens Plan has problems. It calls for massive federal subsidies. And while natural gas engines do work... they aren't as powerful as traditional diesel engines. We'd have to build a lot of new fueling infrastructure.
Regardless, Pickens' main point is a good one: We have a tremendous amount of natural gas we aren't using right now.
I can't tell you if the government will get fully behind the Pickens Plan. But I can tell you it's serious about burning less oil and coal. These two are the "dirty" fuels.
And as we've seen with the Nissan Leaf – and the Obama administration pushing various carbon taxes – the government is starting to move America in the direction of increased natural gas use over coal and oil. This will be a major tailwind for natural gas consumption.
Adding to the tailwind on a global scale is a familiar tale in the resource business: The growing consumption by the giant nations of China and India (or "Chindia"). A couple months back, we ran this chart in Market Notes:
 As you can see, Chindia's natural gas consumption is in a giant uptrend. And it's accelerating. The Chinese government just reported its natural gas imports were 30% higher in the first 11 months of 2010 than the same period in 2009. That's an incredible increase.
"Chindia" generates most of its electricity with coal... But it knows coal produces horrible pollution. It badly wants to increase its percentage of electricity generated from clean natural gas (and uranium). This is driving more gas consumption and more gas imports. It's a big tailwind for natural gas prices over the long term.
Huge forces are escalating natural gas consumption: It's cheap... It's clean... It's abundant... The U.S. government loves it... And "Chindia" is consuming more and more of the stuff.
While this demand tailwind won't cause a short-term explosion in natural gas prices, it's a no-brainer to start hoarding the stuff right now... in advance of the coming consumption boom.
Fortunately, it's not that hard to find safe, North American gas hoards on the cheap. In tomorrow's essay, I'll give you a list of natural gas hoarders I've been looking into. If the price of natural gas heads from $4 to $6 or $8 in the coming years, these stocks will skyrocket in value.
Good investing,
Matt
Further Reading:
"The price of natural gas is so low, it's not economic to drill for it," Matt says. "And natural gas properties are going for peanuts. Everybody thinks it's dead, which is when good contrarians buy with both hands." Get the full scoop here: An Unusual Kind of Commodity Stock That Can Return 1,000%.
Market NotesTHE EURO JUST BLEW THROUGH AN IMPORTANT LEVEL Beware of the euro... the important paper currency just violated a big number...
DailyWealth sees paper currencies like the dollar and euro as rough "stock prices" of countries or economic unions. Generally speaking, if a country manages its finances well and engages in productive behavior, its currency appreciates over the long term. If a country runs its finances like a drug addict and racks up crazy debts, its currency depreciates over the long term.
Most smart analysts put the status of the European Union's balance sheet in the "drug addict" category. In order to pay for all sorts of bailouts and handouts, nations like Greece, Ireland, Portugal, and Spain have run up impossible debts. Bond and stock prices are plummeting in those nations as they struggle to pay them back. Bank stocks in Portugal, for instance, just struck 15-year lows.
All this is hard on the paper currency backing the mess, the euro. As you can see from the chart below, the euro enjoyed a rally in late 2010 as folks got to thinking things were great. But in the past few months, the euro got clobbered... and just last week, declined past $1.30 to reach an important new low. The race to the lower right-hand side of the chart is on...
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