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It could be the right people in power are listening to our best advisers:

 

http://seekingalpha.com/article/1574232-charlie-munger-energy-independence-is-dumb

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It could be the right people in power are listening to our best advisers:

 

http://seekingalpha.com/article/1574232-charlie-munger-energy-independence-is-dumb

 

I'm a big Charlie Munger fan, but he's dead wrong on this issue.

 

The geopolitical benefits of accelerating the creation of a global natural gas market, and exporting a ton of oil from the US (which won't be part of any energy cartel), far outweighs some notion that we should be hoarding hydrocarbons because of potential food supply issues.  Furthermore, I think he's just wrong that hydrocarbons will be in short supply and prices will skyrocket.  I believe that we should extract as fast as possible, get everyone in the world more industrialized, and use the wealth that is created to accelerate a century-long switch to renewables.  As renewables substitute for fossil fuels, I wouldn't be surprised if prices stay relatively stable as the supply/demand equation for fossil fuels changes.

 

"Energy independence" is not really the issue.  The point is to create a global natural gas market, which is the exact opposite, and to drive price down for oil through markedly increased supply that isn't subject to OPEC shenanigans. 

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Yeah, a recent Economist issue also had something about this. Seems to make complete sense over the mid-term; the best way to reduce Russia's influence is to create a more liquid and more responsive global market for oil and especially natural gas. (the responsive part is about how it takes so much more drilling with shale, so you can more easily modulate the number of wells you're drilling to respond to supply shocks).

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If anyone cares, here is Citi’s & First Energy’s latest on natural gas. Many of the small & mid cap gas weighted companies have been out of favour for years & were definitely the contrarian bet in the last few years. Many have rallied but could advance significantly more if NG stays priced $4.50 or higher over the rest of 2014. Higher NG prices should be great for Western Cdn tax revenues and all the other spin off benefits from the higher pricing in other parts of the economy.

 

Weekly Canadian Natural Gas Supplement

 

Analyst: Martin King Associate: Elaine C. Williams

 

The enormous volatility of the past month for Aeco pricing has placed the average spot price for the month of February at

Cdn$7.36 per mcf. This is the highest monthly average price since August 2008 (Cdn$7.42 per mcf) and the highest February

average since 2008 (Cdn$7.89 per mcf). Western Canada storage is at its lowest level for this time of year since 2006, with

withdrawals still running north of 2 bcf/d for Alberta. Since the start of November 2013, the cumulative withdrawal from Western

Canada storage has reached 362 bcf, easily an all time record and smashes the previous cumulative record (for the entire heating

season!) of 318 bcf set in 2010-11.

 

Weekly U.S. Natural Gas Storage Update

 

Analyst: Martin King Associate: Elaine C. Williams

 

Our forecast for this week’s storage report is for a withdrawal of 134 bcf. The price meltdown of last week, the greatest seen in 16

years, was probably more a function of the unwinding of managed money positions than expectations for a dramatic moderation

in temperatures or a collapse in demand. The magnitude and the speed of the price collapse should not be read as a collapse of

the price bullish story for 2014. We feel that prices have returned to more normalized levels and that the market is clearly coming

to grips with a storage exit for March that will be the lowest in a decade. Based on forecast degree days, we expect next week’s

report to show a withdrawal between 170 and 190 bcf.

 

Citi

 

The market needs more rigs and rain

 

 The market may need more than hopeful signs of production growth and

 

precipitation on the West Coast to replenish depleted gas inventories. The

 

end-of-March storage is now expected to fall to ~875-Bcf, 950-Bcf lower than the 5-

 

year average and 800-Bcf lower than last year’s level. Eliminating these deficits

 

requires excess gas to be made available for injection from Apr to Oct: 4.5-bcf/d vs.

 

the 5-year average storage level and 3.7-Bcf/d vs. 2013’s level. Hence, strong

 

production growth this year is critical. It is helpful that production edged higher w/w,

 

from Oklahoma and the Rockies to the Northeast, as weather turned milder, leading

 

to a decline in well freeze-offs. But in spring and summer, higher gas demand for

 

industrials (up 0.6-Bcf/d y/y) and a drop in gas imports from Canada (down 0.6-

 

Bcf/d y/y) should boost this excess gas requirement by an additional ~1.2-Bcf/d.

 

 Northeast production is both counted on but constrained at the same time.

 

The Northeast has to drive production growth nationally to refill depleted gas

 

inventories but current production is still stuck at just under ~14.2-Bcf/d, nearly flat

 

to the Dec’13 level. Looking ahead, the Northeast appears to have the capacity to

 

grow production by about 3-Bcf/d y/y before hitting infrastructure constraints

 

preventing further gains. (

 

 Strong precipitation in recent days raised the expected Pacific Northwest

 

hydro generation through June, but this relief to gas demand is far from

 

enough to resolve the supply-demand tightness in spring and summer. Nearly

 

two weeks ago, lower Pacific Northwest hydro generation was expected to boost

 

gas demand by ~30-Bcf y/y, which is not insignificant in an already tight market.

 

(See the note Impact of the West Coast Drought joint with Citi’s Utilities team.)

 

Although recent precipitation events have erased this y/y difference based on a

 

dam-by-dam analysis, the expected end-of-March storage has also fallen by more

 

than 120-Bcf since then, more than erasing the improvement in west hydro.

 

 Offsetting these signs of a looser market is the sharp reduction in Canadian

 

gas inventories, now nearly 300-Bcf below last year’s level. 1.4-Bcf/d of excess

 

supply from Apr to Oct would be needed to refill storage. As mentioned above, gas

 

exports from Canada to the US should fall by 0.6-Bcf/d y/y, but this assumes strong

 

enough production growth in Canada to meet domestic demand growth (e.g. oil

 

sands production) and refill storage. Stronger west hydro helps to ease the demand

 

for Canadian gas exports to the West Coast, but the support to AECO prices

 

remains due to low Canadian gas storage. Any shortfall may have to come from

 

cuts to gas exports to the US, thereby tightening the US gas market further.

 

 For this week, Citi estimates a 140-Bcf inventory withdrawal vs. a draw of 95-

 

Bcf last week and a draw of 146-Bcf last year. A rise in national HDDs from 158

 

to 198 pushed up demand by about 7-Bcf/d, mainly in the residential and

 

commercial sector, but electric heating was also seen to be higher w/w.

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Milken Institute: The Natural Gas Economy

http://www.milkeninstitute.org/events/gcprogram.taf?function=detail&EvID=4840&eventid=GC14

 

Good stuff.  Here's the panel:

 

-Ralph Eads III , Vice Chairman, Jefferies LLC

-Stephen Green, Vice President, Policy, Government and Public Affairs, Chevron Corporation

-John Hickenlooper, Governor, State of Colorado

-Fred Krupp, President, Environmental Defense Fund

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