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mode7 (96.26)

Peak Natural Gas (you heard it here first, folks!)

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August 12, 2009 – Comments (10) | RELATED TICKERS: CEP , ENT , UNG

* In the interest of full disclosure, I own shares of CEP (a natural gas company), so this blog post could possibly be partial.

 

You've heard of peak oil? Well, I'm starting a new theory called peak natural gas. It's based on the fact that natural gas is formed in associated with fossil fuels and according to wikipedia is also "created by methanogenic organisms in marshes, bogs, and landfills."

Now as you know, urban sprawl has been transforming our marshes and bogs into shopping mall parking lots and such. And for the sake of the peak natural gas theory, we're just going to go ahead and ignore landfills. I mean, who has ever heard of drilling for natural gas amongst heaps of old newspapers, rubbish, and fast food containers?

So as the price of oil increases without triggering an increase to the price of natural gas, more demand for natural gas will be seen in the future, especially as peak oil sets in at $400 a barrel. The destruction of marshes & bogs will further increase the strain on natural gas supplies sending natural gas upwards of $30 per natural gas traded units (and you don't even want to know what it will be trading for once the big trading houses catch wind of this theory).

As a side note, in the interest of capitalism, pressure needs to be put on ecologists vs. economists, so the further paving of marshes and bogs can take place. I mean really, have you been to Florida lately? Do we really want more alligators & water moccasins when we can have alligator skin purses and moccasin boots? I like to subscribe to the theory "that which doesn't kill us makes for an excellent fashion statement".

So who's with me? It's time to spread the gospel and use up all those fossil fuels and pseudo-fossil fuels while we have the chance. I mean, in the end, once they're gone, won't it be good for the environment anyway? I call this zero sum environmentalism, and hopefully it'll make both sides of the global warming debate happy in the end. And if it doesn't, at least we won't have to deal with that pesky season of the year called "winter" anymore.

*In the sake of like total disclosure, I'll probably be shorting the snow shovel sector as well. 

10 Comments – Post Your Own

#1) On August 12, 2009 at 1:31 PM, IBDvalueinvestin (96.42) wrote:

if you believe what you wrote then BEXP, ATPG, &  SGY are better plays for Natural Gas as well as oil.

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#2) On August 12, 2009 at 1:44 PM, mikecart1 (98.00) wrote:

Natural Gas will rise but not anytime soon.  It's all about that there black gold. ;)

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#3) On August 12, 2009 at 2:01 PM, ReadEmAnWeep (88.90) wrote:

What are some good ways to get in on oil?

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#4) On August 12, 2009 at 2:03 PM, catoismymotor (92.72) wrote:

 "I call this zero sum environmentalism..."

Well written! You made me laugh out loud. Good job. :)

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#5) On August 12, 2009 at 2:29 PM, StopLaughing (< 20) wrote:

How did you arrive at a $400 figure for oil?

Roubini is suggesting that $100 oil would be as damaging to this current economy as $140 was last peak. I tend to agree with him that $100 oil would choke off the recovery. 

There is no shortage of Nat Gas and there are some switching costs from oil to gas. I would expect some switching as oil rises.  It would take a decade and government policy to switch half of US oil consumption to Nat Gas. It is more likely that hybrids will create the switch over a decade thru market forces. The Hybrids will use electricty generated by gas and mostly coal.

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#6) On August 12, 2009 at 3:11 PM, mode7 (96.26) wrote:

Not many Swift fans among the fool crowd, eh?

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#7) On August 12, 2009 at 9:30 PM, ChrisGraley (99.67) wrote:

Peak Natural is not possible. Natural gas is primarily methane. The US government has already done a gazillion dollar study on cow flatuence that says they are putting enough methane into the atmosphere to destroy the ozone layer.

So all you need to produce more methane gas is a bunch of cows! Not regular cows though, to be more efficient you should get those new mini cows. That way, you could stack them on shelves in your new methane production plant. To make it even more efficient I would recommend feeding each mini cow a few Chalupas from Taco Bell.

So to recap, your investment picks for an alternative energy play should be Taco Bell, IKEA, and this place.

That's it for tonight's show guys and remember, if the woman don't find you handsome, they should at least find you handy.

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#8) On August 13, 2009 at 11:34 AM, mode7 (96.26) wrote:

I think the efficiency would be increased as well if they were mini dairy cows. You could milk them at the same time you're harvesting the methane. Basically you just need a modified automated cow milking machine with a separate runoff tube for gas. You'll want to make sure not to mix up which is which though when running the mini-cows through the assembly line. 

As a side note, I really ought to visit Canada again sometime soon.

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#9) On August 13, 2009 at 11:45 AM, catoismymotor (92.72) wrote:

 Speaking of Cows:

Two Cow Economics

The "two-cow explanation" of what makes...

A CHRISTIAN DEMOCRAT: You have two cows. You keep one and give one to your neighbor.

A SOCIALIST: You have two cows. The government takes one and gives it to your neighbor.

A REPUBLICAN: You have two cows. Your neighbor has none. So what?

A DEMOCRAT: You have two cows. Your neighbor has none. You feel guilty for being successful. You vote people into office who tax your cows, forcing you to sell one to raise money to pay the tax. The people you voted for then take the tax money and buy a cow and give it to your neighbor. You feel righteous.

A COMMUNIST: You have two cows. The government seizes both and provides you with milk.

A FASCIST: You have two cows. The government seizes both and sells you the milk. You join the underground and start a campaign of sabotage.

DEMOCRACY, AMERICAN STYLE: You have two cows. The government taxes you to the point you have to sell both to support a man in a foreign country who has only one cow, which was a gift from your government.

CAPITALISM, AMERICAN STYLE: You have two cows. You sell one, buy a bull, and build a herd of cows.

BUREAUCRACY, AMERICAN STYLE: You have two cows. The government takes them both, shoots one, milks the other, pays you for the milk, then pours the milk down the drain.

AN AMERICAN CORPORATION: You have two cows. You sell one and force the other to produce the milk of four cows. You are surprised when the cow drops dead.

A FRENCH CORPORATION: You have two cows. You go on strike because you want three cows.

A JAPANESE CORPORATION: You have two cows. You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.

A GERMAN CORPORATION: You have two cows. You reengineer them so they live for 100 years, eat once a month, and milk themselves.

AN ITALIAN CORPORATION: You have two cows but you don't know where they are. You break for lunch.

A RUSSIAN CORPORATION: You have two cows. You count them and learn you have five cows. You count them again and learn you have 42 cows. You count them again and learn you have 12 cows. You stop counting cows and open another bottle of vodka.

A MEXICAN CORPORATION: You think you have two cows, but you don't know what a cow looks like. You take a nap.

A SWISS CORPORATION: You have 5000 cows, none of which belongs to you. You charge for storing them for others.

A BRAZILIAN CORPORATION: You have two cows. You enter into a partnership with an American corporation. Soon you have 1000 cows and the American corporation declares bankruptcy.

AN INDIAN CORPORATION: You have two cows. You worship them.

ENRON CORPORATION:  You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so you get all four cows back with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholders who sell the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option to buy one more.

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#10) On August 13, 2009 at 3:58 PM, ReadEmAnWeep (88.90) wrote:

Ha ha, nice comment  catoismymotor.

I think waiting for a peak in oil or gas would be nuts becasue chances are the same it can happen in 30,50, or 100+ years, since no one really knows how much is left and how much it will cost to get all that is left.

(Full disclaimer ReamEmAnWeep owns 100 underground mini-cow methane/milk farms.)

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