If the elections accomplished anything, President Obama finally mentioned natural gas and not "clean coal". It is the first time Obama has not pushed the myth of oxymoronic "clean coal" and instead supported natural gas - the superior fuel in terms of cost, supply, and the environment.
Mr. President - what took you so long? Obviously, it was the shellacking received in the election. One can only wonder how much better off the country would be today had Obama supported natural gas and natural gas transportation legislation when he entered office almost two years ago.
With natural gas supplies and production way up, with oil prices over $85/barrel, and with natural gas under $4/MMBtu, who can doubt that NOW is the time for the country to embrace natural gas transportation? Now is also time for the EPA to do its job and regulate the natural gas drillers such that we don't allow natural gas producers to pollute our water resources like the coal industry has done. All we need is some pragmatic energy policy leadership.
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Americans are clamoring for the government to embrace natural gas transportation as the primary solution to solve the country's severe economic, environmental, and national security problems. Assuming Washington has finally gotten the message, what stocks should we invest in?
The temptation is to invest in natural gas producers. However, I believe natural gas prices will remain low for quite some time. Massive shale plays, the inability of big oil to corner the market (most of the natural gas in the U.S. is produced by small independent companies), and recent deployment of LNG import infrastructure (notably Exxon Mobil's (XOM) Qatari LNG trains coming online) all point to high supply and relatively low prices for an extended period of time. We should look elsewhere to invest - principally the natural gas infrastructure plays.
Fuel Systems Solution (FSYS) is a strategic natural gas transportation infrastructure provider. Although its recent quarterly results and guidance may have been disappointing to some, the selloff from $42 to below $38 seems overdone. The P/E ratio is less than 10 and FSYS is investing smartly to take advantage of emerging market economies embracing natural gas transportation. The stock is not dependent on the natural gas lightbulb going off or even flickering in the U.S. This stock is a buy under $45/share.
Another major player in natural gas transportation is Westport Innovations (WPRT). Westport is involved in natural gas engines for large trucks. It too is selling off due to a recent announcement for a pending secondary offering. I read an analysis yesterday that this offering might impact earnings by a penny a share. Regardless, this stock should be considered should it approach $16/share.
Clean Energy Fuels Corp (CLNE) is another obvious choice. The stock can be frustrating as it seems to trade up-or-down based on rumors of this-or-that piece of legislation passing. However, long term, CLNE should prosper despite the roadblocks the U.S. government has constructed to impede natural gas transportation.
A sleeper in this industry is General Electric (GE). GE is already a major player in the oil and gas industry. Its recent announcement to buy the old Dresser Industries is yet another step the company is taking to expand its energy business. In the case of Dresser - the natural gas infrastructure business. Like CEO Jim Mulva at Conoco Philiips (COP), I cannot for the life of me understand why Jeff Immelt does not strongly and publicly support natural gas and natural gas transportation. Not only will natural gas transportation infrastructure profit GE's energy business sector, but the adoption of natural gas power generation dovetail nicely with GE's wind turbine business. Immelt should be pounding the table for the U.S. to adopt a strategic long-term comprehensive energy policy centered on the country's most abundant, clean and cheap energy resource: natural gas. Not only would it be great for the country, but GE is well positioned to take advantage of such a major development.
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QE2 or Natural Gas Transportation?
Recent monetary policies like QE2 are doomed to fail. Trying to address a commodity problem (foreign oil imports) by monetary hijinx is clearly a flawed "strategy". From a high-level view, consider this: the U.S. imports ~12,000,000 barrels of oil a day. At $85/barrel, this equates to $960,000,000 per day. To that amount, let's add in American military expenditures in the Middle East and we'll call it $2 billion a day.
The QE2 plan to print $600 billion dollars buys us what, 300 days of "funding" for our foreign oil and military exploits? But at what cost and what then: QE3...4...5...? The U.S. dollar was immediately devalued and oil went up $1.50/barrel (see chart above). We lost $18,000,000 the first day of QE2 due to the oil price movement alone! The prices of all commodities went up, causing yet more pain for middle class Americans.
Clearly, Washington has got to come up with a plan to reduce foreign oil imports as opposed to devaluing the currency. Foreign oil imports are THE fundamental problem eroding the U.S. economy, the wealth of our nation, and the most serious long-term national security issue we are facing. As I often say, if printing paper dollars was the way to economic success, the Weimar Republic and Zimbabwe would be running the world today. Clearly they are not, and clearly the Federal Reserve is on the wrong track despite yesterday's jubilant stock market.
In conclusion, the United States government, our energy policymakers, the media, and the American people must embrace and adopt natural gas transportation now. Not only in the long-haul trucking sector, but for middle class Americans' cars and trucks. We can re-industrialize this nation, take advantage of our #1 economic advantage against all other countries on Earth (our natural gas pipeline system combined with our abundant, cheap, and clean natural gas assets), bolster our currency and our financial strength. We can create millions of good paying real jobs in the private sector and usher in an era of prosperity few Americans today can even dream of. The time is now: Embrace natural gas transportation.
Disclosure: Long COP