Natural Gas Price Increases a Natural Result?

There’s been a good deal of attention on energy billionaire T. Boone Picken’s natural gas legislation, which was introduced in the house last week with 154 co-sponsors. The general buzz is indicating a fair amount of popular support for the bill, which would amend IRS code to promote investment in natural gas and in producing these vehicles, among other incentives. According to Pickens in an interview with Rhonda Schaffler of Reuters, the big advantage of the bill will be shifting the fuel consumption of 8,000 trucks on the road from diesel to natural gas, which Pickens claims will cut our reliance on OPEC in half.

Now, theoretically, the introduction of such a bill could cause some major changes for both natural gas and crude futures. Investors should be running to invest in the future of transportation fuel, driving the price of natural gas up. They would be abandoning their long crude positions, looking to get out before America no longer used oil anymore.


Crude versus Natural Gas year to date

And then we look at the data. Year to date, Crude is up 13.76%, and Natural Gas is down 6.78%. Perhaps the further out contracts are changing, you say. Nope. The furthest out contract being traded for Natural Gas is June 2021, and its most recent settlement was up a measly .12% since the beginning of this month. The furthest out contract being traded for Crude is December 2019, and its most recent settlement had it down a total of 5.4%. These aren’t exactly big market shake ups, and could have just as much to do with a variety of other factors as they do the Pickens proposal. But then again… this legislation has been introduced in different forms several times over the past couple of decades, and there hasn’t been a vote on this version yet. It is still possible that those swings will occur, just as soon as investors see the Pickens proposal signed into law.

For now, looks like Natural Gas will remain a type of pseudo savings account for many traders, where they park extra cash knowing there isn’t too much downside (having lost 85% of its value since 2001), and a whole lot of potential upside should we finally get serious in this country about confronting our addiction to oil.


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