President Obama is Wrong: Why Fossil Fuels Remain the Future
Natural Gas is the Way Out
Three quarters of the way through his snooze-fest of a speech last night, Barrack Obama said:
A larger lesson is that... drilling for oil these days entails greater risk. After all, oil is a finite resource. We consume more than 20 percent of the world's oil, but have less than 2 percent of the world's oil reserves. And that's part of the reason oil companies are drilling a mile beneath the surface of the ocean — because we're running out of places to drill on land and in shallow water.
I have no problem with this. It is absolutely true.
Here at Angel Publishing, we've been preaching this message for more than five years. In fact Brian Hicks, the owner and publisher of Angel, wrote the book on it — Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century.
But this I do have a problem with...
The president went on to say:
For decades, we have known the days of cheap and easily accessible oil were numbered. For decades, we've talked and talked about the need to end America's century long addiction to fossil fuels. And for decades, we have failed to act with the sense of urgency that this challenge requires.
That's because there is no way America can end its addiction to fossil fuels.
Solar, geothermal, and wind power just aren't there yet. According to RAND, they now represent 6% of all energy. In 2025, renewables are projected to provide 25%.
That means in 15 years — by even the most optimistic forecast — we will still have 75% of our energy coming from fossil fuels: oil, natural gas, and coal.
Yes, you can build more nuclear power plants... and the Obama administration is pushing for that. But plant construction could take from three years to forever to be up and running.
The “not in my back yard” philosophy is a high hurdle to clear.
We need fossil fuels
According to the latest United Nations Statistics data, the United States is still the world's largest manufacturer, with an output of $1.83 trillion. (China remains number two at $1.79 trillion.) And you still need cheap energy to add value to products.
Nor is there a feasible wind, solar, or geothermal transportation grid.
As you can see by the graph put out by the EIA, oil is used for industrial production and transportation; we need more of it every year.
In other words, cars and factories require oil... The only way you can still have cars and manufacturing is to switch from oil/gasoline to batteries and natural gas. (I can't wait until the politicians try to take peoples cars... and they will try... )
And yet Obama says nothing about this.
He only speaks in trite platitudes and tells BP to give him $20 billion in escrow.
This lead the Drudge Report to use the following headline today: “Barrack Petroleum.” It fits in nicely with GM as Government Motors.
(As a sign of how good the government is at running companies, Freddie Mac and Fannie May were delisted from the NYSE today and sent to the pink sheets.)
But as I've said, we've been all over these trends for years.
There is one company that already makes the world's best battery, and is now making the world's best battery-powered car.
The other way to profit from the natural gas trend is to buy into the fact that natural gas is a cheaper form of energy for long-haul truckers.
All the big companies like Peterbilt and Mack Truck are producing natural gas-powered trucks. And the infrastructure for refueling is being built across the country.
But get this... Only one company makes the natural gas truck engines for all the 18 wheelers being made in the U.S. today — and my colleague Nick Hodge is putting the final touches on that report. Look for it in your mailbox on Friday.
Three reasons to buy natural gas
Natural gas is not only bullish in the long-term trend in the political sphere; it is an abundant, American-produced, clean-burning energy source... and it's been proven to shoot up during hurricanes.
Reason #1: Massive hurricanes brewing
And if you haven't heard, the National Oceanic and Atmospheric Administration called for an “active or extremely active” hurricane season, expected for the Atlantic Basin this year.
Projections indicate a 70 percent likelihood of 14 to 23 named storms, with eight to 14 hurricanes — three to seven being categories 3, 4, or 5.
The average hurricane season sees an average of 10 storms. Six of those become full-blown hurricanes; of those six, two will become Category 3 or higher — meaning sustained winds that reach between 111 and 130 mph.
So, it's a big deal to forecast up to 23 named storms and up to 13 hurricanes.
We've already had an unusually early storm called Agatha which hit the Eastern Pacific. Think of what that will do to the oil now scattered all over the Gulf if it gets carried inland in a storm surge...
There are three reasons for NOAA's forecast:
1. A tropical multi-decadal signal; this is the reason for the high number of Atlantic hurricanes since 1995.
2. Exceptionally warm sea surface temperatures in the Main Development Region, which includes the Caribbean Sea and tropical Atlantic Ocean.
3. The likelihood of an ENSO-neutral or La Niña conditions. (As you may remember, La Niña tends to produce hurricanes.)
The point is that hurricanes affect oil and natural gas prices. Hundreds of natural gas/oil rigs in the Gulf must be abandoned. Many get wrecked. Some are still leaking from two years ago.
After the one-two punch of Katrina and Rita back in 2005, natural gas went from $10 to $14.75 mmbtu almost overnight.
However, the price of oil actually dropped. This is because oil is fungible and natural gas isn't; nat gas is moved in pipes locally and it has local prices.
Reason #2: It's cheap
The price of natural gas has fallen through the floor, due to the twin apocalypse of falling demand based on the recession and massive new supply based on new fracting techniques.
This is my favorite type of chart. I call it an “L” chart. The ETF has fallen so much that the only people left in are the strong hands of long-term holders. Everyone who was going to sell has sold.
Reason #3: It's a technical buy
Furthermore, if you look at the daily natural gas price chart, you will see that the price of nat gas has broken out above $4.40.
The MACD crossed over mid-month and volume is increasing:
That, my friends, is a clear sign of a bottom with good support around $7.60 on the United States Natural Gas ETF (NYSE: UNG).
Last Friday, I recommended UNG calls in my trading service Crisis and Opportunity and they climbed as high as 73% in three trading days.
Today's pullback gives you a chance to get it.
It looks like nat gas is climbing off the bottom anyway.
A hurricane would launch these options, or even the underlying.
Until next time,
Editor, Wealth Daily
Editor and Founder, Crisis & Opportunity
Investor's Note: If you've been following Christian DeHaemer's editorial in the pages of Wealth Daily and Energy and Capital, you know by now that he sees massive opportunities in buying natural gas and oil cleanup stocks that will profit from BP's $20 billion escrow account.
He is already up 52%, 25%, and 72% — and this run is just getting started.
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