Coal or natural gas — pick your poison.
No matter your choice, there’s a silver lining down the road for each. But I’ll be the first to admit that deciding between the two is easier when you recognize the war on coal that’s currently underway.
It turns out 2014 will be a pivotal year for this raging energy war, too, now that the Environmental Protection Agency is officially on the clock. Time is quickly running out, and the EPA barely has three months left to finalize a national standard for carbon pollution.
It’s not as if our coal plants have been doing well. Fact is, there’s a new breed of electrical generators out there — and practically all of them are running on natural gas.
Click Image to Enlarge
But natural gas has so much momentum at this point that you can’t blame manufacturers for betting on a stronger horse. Ever since the shale gas boom took off in 2008, the average energy price for natural gas has plummeted 36% while prices increased everywhere else.
What’s more is that natural gas prices (assuming we’re not entering the next Ice Age, which is how some of my readers in Chicago may feel) are not set to spike anytime soon. The EIA’s latest Short-Term Energy Outlook expects spot prices at the Henry Hub to hover slightly over $4 per Mcf for the next two years.
Well, a gas glut will do that.
But just because this oversupply of natural gas has turned the tide in the war on coal doesn’t necessarily mean we have to abandon ship.
I hinted above that there was silver lining for coal, and right now, it’s China.
Regardless of how many coal plants are snuffed out by EPA regulations, the inability to compete against natural gas, or simply from being too old, there’s no circumventing increased coal demand in both India and China, which has grown considerably since 2009.
China may talk a good game about its love for a cleaner-burning fuel like natural gas, but the evidence proves this is probably nothing more than hot air. Last month, China’s coal imports rose 56% compared to a year ago.
Of course, that’s right on the back of the record 35.11 million tons of coal that was shipped overseas to China in December.
So which fuel comes out on top?
Winter Winner
Look, I know it isn’t fair to pit your favorite gas producer against the massive coal exporters. Not only is natural gas gaining the most ground in electrical generation, but it also doesn’t hurt that we’re experiencing one of the coldest winters on record.
As you read yesterday, the polar vortex is clearly taking its toll on natural gas storage levels in the United States.
Truth is, picking on Big Coal is almost as enjoyable as — if not more enjoyable than — picking on Big Oil. Trust me, these giant coal companies are in complete control, too. Just four of them account for more than half of U.S. coal production.
You probably don’t need me to tell you that they had a bad year in 2013… or at least their shareholders did. As you can see below, three out of four experienced lackluster performance during the past twelve months.
Even the best one of the bunch, Cloud Peak Energy, is embarrassed by investors who chose to side with natural gas.
Gastar Exploration, for example, holds more than 65,000 Marcellus acres, which produce roughly 62 Mmcfe per day. At present, approximately 55% of the company’s proved reserves are weighted toward natural gas.
Of course, you can quickly figure out which shareholders had a better year:
Still, it’s not just the drillers that are running away with gas profits. Some of the savviest investors in today’s market recognize the long-term profits during our transition toward natural gas.
And they’re actually easier to find than you might first believe.
Make no mistake, these are the gas stocks that’ll reap the benefits of a gas-fueled United States going forward.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.
