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Natural gas mutual funds can be an easy way to play the seemingly inevitable upcoming natural gas boom. The United States already sits on massive stockpiles of natural gas. If that’s not enough, there are innovative technologies that are at the forefront of allowing oil and natural gas from being drawn out of regions that were previously considered inaccessible. For instance, there is the Marcellus Shale Play reaching from West Virginia up to New York and Pennsylvania. Estimates claim there are more than 500,000,000,000,000 cubic feet of natural gas up for grabs. Yes, that’s a lot of “zeros,” but the word “trillion” wouldn’t have had so much impact. So, one might think natural gas mutual funds would suffer. But increased uses will eventually drive prices higher, making them some of the best stocks to buy now. And shale gas plays will produce selective returns in the meantime, making them great stocks to buy and hold in natural gas mutual funds.
Natural Gas Mutual Funds And The Diverse Uses
Natural gas remains a widely used commodity all over the world. It’s even imported to parts of the world where it’s either not naturally found or otherwise hard to harvest. There is a push to use natural gas more and more for vehicles, if even government vehicles initially. Countries other than the United States already use natural gas for this and other purposes. Natural gas mutual funds that hold companies at the core of this mass consumption are good staples.
While the transition to large scale use of natural gas for vehicles may take time to phase in and gain traction in some areas, natural gas is highly used for generating electricity. And, while the market for natural gas cars is uncertain, few people would reject electricity. It’s true that there is a mad dash to deploy alternative energy sources on a mass scale, but natural gas offers a cleaner alternative to things like coal and is ready now. The abundance of natural gas in places like the United States make the application of giant turbines an easy fit. The turbines are able to use natural gas to generate electricity. This use of natural gas is generally more readily accepted in the public eye than the nuclear option that Eastern countries lean more heavily on.
Natural Gas Mutual Funds Appreciating Foreign LNG Consumption
As for natural gas for locomotion, again there is a huge market waiting. Liquefying and exporting natural gas is big potential business. Europe already uses a large amount of liquefied natural gas (LNG). Places like China, which has little gas or little easily accessible gas, stands to be a massive consumer of LNG. As millions of new vehicles are rolled into the Chinese economy, even a decent portion of those geared to run on LNG would be a huge mini-economy. Natural gas mutual funds that recognize these trends and take early stakes in the right companies stand to do well.
A return to more expansive LNG use is certainly in the cards, but the current rage appears to be the developing technologies and more expansive use of methods to extract previously trapped gas. While China could be a huge consumer of LNG, its much more likely that China is more interested in the long term hope of being more self sufficient on its own. China is not a big natural gas producer, but the use of new technologies could enable it to get at gas that may have previously been inaccessible. This promise is prompting big investment by Chinese companies into those companies at the forefront of exploiting the new methods.
Natural Gas Mutual Funds To Benefit From The New Technologies… And Their Potential Pitfalls?
The new technologies are actually rather diverse. One of the most popular approaches, already phased in in the Eastern United States and other places, has to do with hydraulic fracturing. The use of water, as well as chemicals, manages to break the rock and release the gas. Horizontal drilling has become more effective than ever before as well. There is even the use of 3-D seismic mapping technology. As you can see, the potential candidates for natural gas mutual funds is seemingly endless. The problem is that many of these pioneering companies may not make it. Finding a fund that has the acumen to detect the most likely winners is key.
One of the issues that can affect the success of natural gas mutual funds is the external factors that impact the companies it invests in. See, some of these newer technologies do not have a lengthy track record, and concerns about various issues can become larger than life. Not that they may not be well-founded, but uncertainly allows both extremes to take hold. Fracking actually is targeted as a source significant pollution. Movements have developed in some places, such as New York, to oppose fracking or at least phase in its use slowly to track the impact it has on the environment, particularly ground water.
Indeed, deep well drilling using fracking in the Marcellus Shale has faced concern in New York, as that shale gas extraction has already been associated with pollution in the Appalachian area rivers. Soil contamination is one concern. And, of course, the treatment and disposal of recovered fluids is a process that lacks a full understanding of the results of such actions.
Aside from any outward opposition, some industry insiders are actually questioning the potential for widespread success of shale gas recovery. There’s no question that the new shale gas extraction technologies will allow some large deposits to be raided with great success. However, the long-term success of these technologies will stem from the ability to access deposits beyond the low-hanging fruit. As noted, places like China are great targets for tapping trapped gas. Their ability to do this will depend on the overall success of the technologies. At the end of the day, the hope and promise of the gas industry as it relates to the new technologies simply needs to be tempered against the caution of sophisticated industry experts that lend their tempered optimism. Investment in natural gas mutual funds merely needs to be informed by this.
The mixed enthusiasm about the scope of applicability of newer extraction technologies is important for assessing the wisdom of various investments. Under normal circumstances, smaller resource companies can provide massive leverage and the promise of great gains if they are successful. For instance, precious metal miners that explore for, and eventually locate, economically feasible deposits, the upside can be huge as they sell out or into joint ventures with larger producers. The issue here is that the technologies are not fully proven for breadth of application.
As a result, the larger natural gas players may be a better bet. For instance, companies like Chesapeake could signal a prudent investment decision by the manager of various natural gas mutual funds. What happens is that the well-funded companies are in a better position to roll out mass fracking projects, for instance. However, at the same time, their market prowess provides a vote of confidence for foreign companies to put up the cash to roll out shale gas extraction efforts. As noted, Chinese companies want to be at the forefront of this technology. They are willing to buy significant portions of these efforts as a means of piggy-backing on the real-time determination of the viability of the methods. If the methods are shown to work, and work well, these Chinese companies will reap the benefits of returning home to tap the trapped shale gas in their own country.
Natural Gas Mutual Funds And The Price Factor
Natural gas mutual funds will no doubt be impacted by the price of gas. As pointed out, natural gas prices are quite low. They have been for a while. There appears to be decent stockpiles of gas, and yet some American jurisdictions endured periods of time in late 2010 when they had no natural gas. Prices stayed low. Nonetheless, many experts think that a severely cold winter could be enough to put a damper on stockpiles and send prices higher. It seems to be a bit of a two-edged sword. The technologies that could produce profits could also increase supplies and help keep prices down. Yet, new and increased used could actually create need for more supply. Some experts are shocked prices haven’t yet rebounded. Others think it could take several years. Nonetheless, since prices are so low, the downside risk looks quite small. It seems inevitable that prices are destined to go higher. As they trend upward, the value of natural gas mutual funds will increase.
