Natural Gas – what’s not to like?

Spot price of natural gas compared to oil, Janurary 2009 to February 2012

With proven global reserves of 175,400 in billion cubic meters (2006), Natural Gas is being touted as the energy alternative that will free America from it’s dependency on foreign oil. Sometimes called the cleanest fuel source available, the by-products of combusting natural gas are mainly carbon dioxide and water vapour, so it has the approval of environmentalists.

Given all it’s pluses, what’s not to like about natural gas? One word: volatility. The chart above shorts the spot price of both oil and natural gas from January 2009 to February 2012. While natural gas prices has definitely fallen, spot prices have been much more volatile than oil, and with volatility comes opportunity – hedge funds have started to notice and are engaging this market. And once they do? Think back to oil in 2008.

And about that claim Natural Gas will free the US of it’s dependency on foreign nations for energy? Russia has the world’s largest proven gas reserves, and Gazprom biggest natural gas extractor on the planet. Major proven resources (in billion cubic meters) are Russia 47,570 (2006), Iran 26,370 (2006), Qatar 25,790 (2007), Saudi Arabia 6,568 (2006) and United Arab Emirates 5,823 (2006) – sound familiar?

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