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Vanguard Extended Duration Treasury ETF Message Board

  • jshaef1 jshaef1 Aug 17, 2012 8:32 AM Flag


    >>In the short term, power generators switch between fuels to take advantage of lower costs here and there. But as more gas-fired plants have come on line, and as the oldest, most inefficient coal plants are being retired, the shift to natural gas has become structural—pushing up demand inexorably.
    Alas, the price of natural gas doesn’t flow like a tranquil river but has violent ups and downs with sporadic and vicious spikes. Read.... The Coming Spike In The Price Of Natural Gas.<<

    <<Japan pays almost 7 times the price that gas trades for at the Henry Hub—because the Henry Hub is irrelevant. US natural gas is landlocked. Even in the US, there are distribution bottlenecks and demand variations that can produce violent local price spikes. Early January, while gas traded for around $3/MMBtu at the Henry Hub, New York experienced a spike and paid nearly $12/MMBtu! In March, as natural gas was drifting towards its decade low at the Henry Hub, Boston briefly paid nearly $9/MMBtu. Natural gas got massacred in one place and spiked in another!...
    . But US production appears to have peaked, finally, or maybe, after a historic supply-and-demand mismatch that forced prices into the basement of maximum pain. On a weekly basis, according to the EIA, production is still between 3% and 4% higher than the same week last year. However, given the collapse in drilling, production will eventually taper off, and might do so suddenly. Yet, demand from power generators has been skyrocketing as they’ve switched from coal to gas; and on a weekly basis, overall demand has jumped by over 10% when compared to the same week last year—and it’s burning up the record amount of gas in storage….
    Oversupply can’t be corrected by exporting; it causes prices to plunge. And a shortage—a scenario the US may be facing at current trends—will be corrected initially by importing LNG in competition with the rest of the world. So prices may spike once again.<<

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    • >>The overall message of his presentation continues to state the rapid depletion rates of shale gas wells combined with their much higher operating costs compared to conventional oil and gas wells means shale gas must have significantly higher market prices in order for the companies to even approach breakeven let alone a profit or that of a profit which will satisfy their investors.

      Berman is an experienced geologist from the oil and gas industry. While many people have aggressively attacked him personally on this issue, he maintains he is not anti-shale gas but rather wanting to be a realist about the much higher prices for natural gas it’s going to take to make hydraulic fracking economically viable along with the huge amounts of capital needed by the industry on an ongoing basis.<<

      Get NAGS/UNG/UNL while they are cheap :)--enjoy the day.

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