Elliott's Comments

Electric Vehicles vs. Natural Gas Vehicles

Thu, 03 Dec 2009 11:28:52 -0500

bradiop >>Since majority of electrical power is produced from coal, then an electric vehicle can be seen as a coal vehicle. What a concept! <<

52% of electricity in the U.S. is produced by natural gas, nuclear, oil, solar, wind and hydro. 48% is by coal. Depends on how you view "majority."

Electric Vehicles vs. Natural Gas Vehicles

Wed, 02 Dec 2009 13:20:02 -0500

From the article: >>Natural gas producers, storage and transmission companies are a more sensible system to rely upon than electric power plants, electric transmission lines<<

Links and facts to back up this statement?

Advantages of electricity are:

- cheaper and faster to put in power lines than to dig and bury a large gas line

- Electricity is quickly dispatchable for load balancing. Flip some switches and electricity can be moved at close to the speed of light. Gas can take days to cover the same distance.

- Electricity can have a smart grid, gas cannot.

- energy needed to compress and move gas through a pipe is a lot higher than pushing electricity through a wire.

- improvements needed to the electricity infrastructure to handle vehicle charging are consideralby less than the improvements needed to bring CNG to homes, highways and gas stations

If the electric vehicle industry can crack the battery problem, then they win.

Understanding the Dollar Debate

Sat, 14 Nov 2009 12:44:57 -0500

The author wrote: >>A weaker dollar means a higher cost for foreign products, and that is inflationary for the US consumer.<<

I don't think so. The Yuan is tied to the dollar, so a falling dollar causes it to fall with it. That's why with the USD down about 40% from its year 2000 high the cost of Chinese imported goods remain cheap. If anything there are more signs of deflation in the US economy than inflation.

Thoughts on Energy Trading Position Limits

Mon, 02 Nov 2009 16:43:13 -0500

Chris Cook: "I think the market spiked because the investment banks were able to control the physical and forward markets in Brent/BFOE crude oil, and hence the global benchmark price, through the aptly named Brent/BFOE complex of contracts."
===

OK, well, I've never seen evidence of banks in "control" of the markets. In Congressional testimony, a hedge fund manager pointed out that hedge funds, pension funds, ETFs, etc., increased their positions in futures contracts from $13 billion to $260 billion from 2003 to 2008. It was a huge momentum trade, making a profit on the rollover from one contract to the next, and never taking delivery of the oil.

So much money poured in that the price got disconnected from the actual demand for oil.

In a normal free market, prices are high when goods are scarce. When the price of oil hit the peak, world oil storage was full. America's top oil storage facility, Cushing Oklahoma, was turning away oil. The fact that prices were high while oil was in surplus -- is strong proof that the oil futures market was distorted and unbalanced by financial players.

People need to understand that if you truly want the free market to exist in the futures markets, we need to limit participation to professionals who actually produce and consume the commodity at the wholesale level.

Thoughts on Energy Trading Position Limits

Mon, 02 Nov 2009 11:43:24 -0500

I disagree -- "excessive concentration" and "excessive speculation" are part and parcel of the same thing, both of which are activities that damage the futures markets. Futures markets are fragile and they work best as a price discovery mechanism when both sides have an actual interest in the physical commodity. I guess the author forgot we paid $4 per gallon for gasoline in 2008 not because oil was scarce -- inventories were very high -- but because hedge funds and big banks bid up the futures and had no intention of ever taking physical delivery of oil nor gasoline.

The Inflation / Deflation Forces Battles On

Thu, 22 Oct 2009 15:11:48 -0400

Urban myth: the Fed is printing money like crazy. Not true. Go to FRED, the Fed's database, and look at a chart for M2. The total dollars in circulation in 2009 has leveled off after climbing in previous years. Government debt is increasing but total dollars in circulation is not... with high unemployment, there are fewer actual dollars chasing goods. That's why the inflation numbers are so low. With pay cuts, lack of jobs, huge housing price cuts, credit card contraction, etc., deflation is dominant right now. You can't have sustained inflation with a 10% unemployment rate... not enough buyers of goods to push up prices.

United States Natural Gas Fund: No More Futures?

Wed, 14 Oct 2009 11:28:56 -0400

"UNG has attracted more than $3 billion in cash inflows so far in 2009, during which time the fund has lost more than 50% of its value."

B-baaa, herd up the 401k sheep for their monthly shearing!

Why Did Natural Gas Spike?

Tue, 06 Oct 2009 12:37:57 -0400

The ambush of gas traders trying to short the UNG rollover was reported in a gas industry subscription-only newsletter, and confirmed in a later Bloomberg news story.

On Oct 06 05:47 AM Andy Abraham wrote:

> When do you know where there is an imbalance... over bought..over
> sold...

Why Did Natural Gas Spike?

Mon, 05 Oct 2009 11:40:11 -0400

No big mystery. We've seen this movie many times before in stocks and futures markets -- there was an imbalance of way too many traders on the short side playing the "obvious" UNG monthly rollover. When there's an imbalance all it takes is for a few bulls to light the kindling, then shorts buy to cover, the fire gets bigger, setting off more stop losses on the way up. The market never tolerates an imbalance and always finds a way to restore equilibrium.

Natural Gas Production Declines Are Becoming More Evident

Wed, 30 Sep 2009 16:48:25 -0400

Mmarrkk: you raise a good point. I would meet you halfway, and say that the current gas surplus is due to both overfinancing (i.e., loose money) in '08 and depressed demand in '09.

Natural Gas Production Declines Are Becoming More Evident

Wed, 30 Sep 2009 11:55:46 -0400

Any year-over-year analysis using 2008 as a comparison is misleading. When the financials and the hedge funds ran up the price of energy during the commodity bubble last year, the high prices made it attractive for drillers to produce as much as possible. This lead to massive overproduction, which is stuffing all of the available storage today.

Last week 67 Bcf was put into storage. The five year average, using EIA numbers, is 65 Bcf this time of year. I'm not seeing evidence of lower-than-normal production, only a return to normal levels. I think the real story is that we continue to have normal production in the face of a 500 Bcf surplus.

UNG: The Best Way to Invest in Natural Gas

Thu, 17 Sep 2009 11:57:15 -0400

Today's quotes: front month gas futures = $3.65, next month = $4.61. That one dollar premium is a steep fee to pay every month when holding UNG.

Coming Soon: State ETFs

Wed, 16 Sep 2009 19:08:24 -0400

California ETF could have some big names: Chevron, Disney, H-P, Intel, Safeway, Apple, Northrup-Grumman, Cisco, Amgen.

Rough Times Ahead for Natural Gas

Fri, 11 Sep 2009 12:10:49 -0400

Working gas in storage is 500 Bcf above normal and producers continue to inject more at the rate of 60 to 70 Bcf a week. Storage usally peaks around Nov 1 and then is drawn down at approx rate of 450 Bcf per month during winter. Just to draw down the excess in storage is probably going to take until December, even longer if we get the expected mild El Nino winter.

Natural Gas: Extreme Contango Suggests Caution for E&P Companies

Tue, 08 Sep 2009 15:55:04 -0400

Two main reasons Congress is ignoring NG

1. Coal lobby

2. Political calculations -- Pennsylvania is an important swing state in elections, and neither side wants to be punished by Penn voters for causing the loss of coal industry jobs.

On Sep 08 12:01 PM GotLife wrote:

> Current Congress is not enamored with NG because of carbon emissions.
> Their base is awaiting "energy with zero ecological impact" and have
> also decried shale drilling for NG based on water table consequences.
> Anybody notice the ban on windmills over most of the western states
> until the effect on the Prairie Grouse is evaluated?
>
> So, we keep burning coal and exploding gasoline. Maybe the OPEC nations
> and mother Russia ARE smarter than US.

Why the Fuss over Natural Gas ETF?

Thu, 03 Sep 2009 11:04:15 -0400

The chart is chasing its own tail. Since UNG owns a large percentage of futures and swaps, of course the price movements of UNG and futures front month are closely correlated. The real question is, what would the price chart look like if UNG did not exist?

Natural Gas Is Cheap Compared to Oil

Wed, 02 Sep 2009 10:57:35 -0400

There are two camps: one camp says the oil/gas ratio is at an all-time low and it has great significance; the other camp says that oil and gas have different markets, are used in different products and cannot be compared.

The author's "squiggle chart" looks like the night's walking path of the town drunk. It's hard to argue that oil and gas have any sort of relationship at all.

Supply Glut Pressuring Natural Gas

Mon, 31 Aug 2009 11:31:12 -0400

On Aug 31 10:03 AM Mad Hedge Fund Trader wrote:

> Natural gas
> at these prices is another way of buying oil at $18 a barrel, with
> less pollution.

Really? Wow, I had no idea they could take natural gas and make gasoline, diesel and jet fuel out of it.

Speculators Keep the Market Liquid

Tue, 18 Aug 2009 10:53:31 -0400

This article laments misinformation yet it spins history to paint speculation in a positive light.

Everyone knows what really happened in 2007-08. Hedge funds, pension funds, ETFs, etc. poured billions of dollars into energy futures. Trend followers jumped in. As long as the price went up a few dollars every month with the rollover, the trend kept going.

The problem is that the financial speculators never take delivery of physical product. Futures markets work best when most of the participants actually produce or buy the product at the wholesale level. That's when supply and demand are truly in balance.

When oil ramped up to $150/bbl under a normal supply-and-demand regime you would think there would be a shortage of oil. The opposite was true -- inventories were very high. That's because the financial demand for futures got way ahead of the physical demand for oil. Position limits on financial speculators (but not industry hedgers) are a good thing and will help keep futures markets undistorted.

The UNG Dilemma: Doing What's Right vs. Making Money

Mon, 17 Aug 2009 11:32:23 -0400

Since UNG announced its self-imposed freeze on issuing more units on Aug. 12th, the front month nat gas futures have gone down every day and have made a new low. NGU9 has dropped from $3.50 to $3.17 in two days.

The author mentions the moral high ground -- the question of morals lies with the SEC and the CTFC, as it is up to them to correct the mistake they made by allowing commodity ETFs to exist in the first place.

6 Ways to Play Clean Energy

Fri, 14 Aug 2009 15:37:52 -0400

Previously undiscovered type of hydrogen?
Fractional quantum states?
More heat out than you put in?

Uh huh. Sounds like cold fusion warmed over.

On Aug 14 02:21 PM Davewmart wrote:

> There is a seventh clean power source, or there may be, but since now we have some external verification, it may be worth a flutter by the bold, and certainly bears watching as it would cause huge<

UNG Hasn't Changed the Laws of Natural Gas Supply and Demand

Thu, 13 Aug 2009 16:22:50 -0400

On Aug 13 02:59 PM H. T. Love wrote:
> On Aug 13 11:35 AM Elliott wrote:
> I'm afraid the author may not fully understand how the futures markets
> work. There's no question UNG has distorted the futures market.

Since I'm new, can you reconcile that statement with this for me please? (link to UNG's SEC filing)

===========

I laughed when I read UNG management's "defense" in its SEC filings. They best they could do was a simple price chart? The elephant in the room they tried to ignore is, how much more would the price of NG gone down if UNG hadn't been pouring money into futures?

Regardless, I have to discount UNG's own arguments -- they obviously are not an unbiased source.

Credit Suisse's energy analyst says,

"A wave of UNG purchases in May occurred in the absence of natural shortsellers in the market, creating a sort of self-fulfilling prophesy. UNG buyers may have been purchasing shares on the belief that the price of gas would rise and cause it to gain ground from the lows set in April. Up until last week’s sell-off, the floor for gas prices had seemingly reset $0.50 higher, based on the ebb and flow of UNG fund. However, during June, even the increased surge of investors into UNG has failed to lift prices above $4.50.”

“We believe one of the primary reasons the market was unable to rally above market highs set in May was that there were a number of producers that began to add hedges in June in order to capture the improvement in the curve. A temporary restriction preventing UNG from issuing additional units, and subsequently purchasing incremental contracts of natural gas, means that the season’s most important buyer has stepped to the sideline. The vacuum created by UNG’s absence in the gas market seems likely to lead to continued pressure on prices.”

Wall St Journal, July 16 "Natural-Gas Prices Slide as a Key ETF Can't Buy" -- discusses how UNG's trading halt pulled the rug from NG's price.

===========

> Proof that UNG is distorting the markets is that the gas
> rig count went up last week despite record inventories.

I can't see how another add vs. reduction *proves* that UNG distorts.
========

Drillers have been eating up 2010 hedges at $6 and $7. Now take UNG's $3 billion of market cap out of the market, how much lower would the 2010 prices be? If 2010's were at $3 or $4 absent UNG then drillers wouldn't be so eager to hedge because they can't make a profit at that price. And so what UNG is doing is encouraging more drilling even when more physical gas isn't needed.

========

Can you explain to me these prices 2000-2008? Prices rose *long* before UNG existed. Look at this chart.

========

The 2008 bubble was driven by hedge fund money, Amaranth, pension funds, etc. -- UNG was a very small player then (as the chart shows). Basically what we're seeing now is that UNG is the new Amaranth, a dominant player, but without the speculative positions.

The Chevy Volt Could Transform Fuel Economy

Thu, 13 Aug 2009 13:40:15 -0400

Ripskii -- I don't know where they got that number. Per the EIA the average residence pays 11.6 cents per kWh.

www.eia.doe.gov/cneaf/...

On Aug 13 11:42 AM ripskii wrote:

> Elliot: I noticed that GM assumed $0.05 per KWH for electricity cost
> for charging. I don't know where rates are that inexpensive--perhaps
> in France next to the nuclear generator?

UNG Hasn't Changed the Laws of Natural Gas Supply and Demand

Thu, 13 Aug 2009 11:35:50 -0400

I'm afraid the author may not fully understand how the futures markets work. There's no question UNG has distorted the futures market.

Stocks have a fixed float, futures do not. As money pours into UNG, more and more front month contracts get written, sending a signal to the markets that there is a huge demand for natural gas. But wait! This is a false signal because UNG holders never take physical delivery of the product. As a result the linkage between the true physical demand for natural gas and the financial demand for natural gas contracts is broken.

Once the front month ends, UNG has to roll its huge holdings into the next month. This again creates an artificially high demand for contracts, pushing up the prices and making the contango steeper than it would be if the number of contracts actually represented the physical demand.

Proof that UNG is distorting the markets is that the gas rig count went up last week despite record inventories. UNG pushes up the price, giving an incentive for drillers to drill, making the inventory even bigger. This is key: if you buy UNG, your own money is used against you to increase supply!

Gas would probably be below $3 if UNG never existed. The end result of all this will be higher utility bills for electricity and home heating.

The Chevy Volt Could Transform Fuel Economy

Wed, 12 Aug 2009 18:32:12 -0400

The math isn't hard, but I can't duplicate GM's 230 mpg number.

1 gallon of gasoline = 125,000 BTU
1 kW-h of electricity = 3413 BTU
Battery on Volt is 16 kW-h.
Range on battery only is 40 miles.
16 kW-h = 54600 BTU = 0.4 gallons of gasoline
40 miles / 0.4 gal = 100 mpg energy equivalent

... but you paid maybe 10 cents per kW-h at your home power plug, or $1.60 to charge the battery.
Assuming $3/gal gas, $1.60 is equivalent to 0.53 gallons.
40 miles / 0.53 gal = 75 mpg price equivalent

True answer seems to be around 75 to 100 mpg, which is very good, but it's not 230 mpg.

How Natural Gas Can Save the U.S. Economy

Wed, 12 Aug 2009 14:47:46 -0400

Art005 -- I'm taking storage efficiency into account.

We know that the Chevy Volt will be rated EPA about 230 mpg and the Nissan Leaf over 300 equivalent mpg. The most efficient CNG vehicle comes in at __ mpg? There's no way no how any CNG vehicle is going to be over 50 mpg. CNG is not in the same ballbark.

The problem is the internal combustion engine. It has too many moving parts, too much internal friction. It's an old technology that's served us well but it's time to move on.

The free market is answering the EV vs. CNG question: automakers are rushing new electric vehicles to market but are not rushing CNG. I think it's because the engineers know that electric cars are the next quantum leap in energy efficiency and low cost operation.

I say develop nat gas, nuke, coal, wind, etc. and make lots of electricity and use it to power small urban cars. Farmers, ranchers, big rigs, etc. can continue to use gasoline, diesel and CNG.

On Aug 12 11:56 AM ART005 wrote:

> Elliot, you are not taking into account the cost of the battery for
> a full service elec. car with on board generator. You are refering
> to a misleading definition of efficiency based only on electrons.
> If you include storage efficiency costs the picture changes dramatically!!

How Natural Gas Can Save the U.S. Economy

Wed, 12 Aug 2009 11:31:13 -0400

M Fitzsimmons wrote >>>Elliot: you are against natural gas transportation because it is not efficient enough for you? ok, well, answer me these questions:
1) do you think US addiction to foreign oil is a problem?
2) do you think the US will go under if it keeps importing 60-70% of its oil in an era where worldwide oil supply won't keep pace with worldwide oil demand?
if you agree to 1) and 2), then please tell me how the US will signficantly reduce it oil imports *without* using natural gas transportation. <<<<

You might want to read my original post again. Yes, I think US addiction to foreign oil is a problem. Yes I am all for developing domestic natural gas. However, I think it has been demonstrated repeatedly that less energy is wasted if natural gas is used to make electricity, and then that electricity used to power electric cars, than putting NG directly into NG-powered vehicles.

If we are serious about maximizing the use of domestic energy sources, whether it be nuke or NG, then a key component of any strategy will have to be the phase out of the internal combustion engine for passenger cars.

How Natural Gas Can Save the U.S. Economy

Tue, 11 Aug 2009 14:41:16 -0400

I agree it should be national policy to consume more domestic natural gas and less imported oil. I disagree that natural gas transportation is the way to get there.

As I've posted on SA before, the problem is that all internal combustion engines are relatively inefficient. Depending on which study you quote, anywhere from 60% to 84% of the energy you put into internal combustion is wasted on heat and internal friction losses. What a shame it would be to take our precious natural gas reserves and waste most of it out of our collective tailpipes.

Electric motors are the most efficient motors known (actually, the bicycle is the most efficient motor known to man, but let's not go there) and approximately 75% of the energy put into an electric motor rolls the car forward, and only 25% is wasted on friction losses.

More efficiency is gained when natural gas is burned for electricity. Modern combined cycle generation plants are very efficient at converting gas to electricity -- combined cycle means the waste heat of the first turbine is captured to make steam and drive a second set of turbines. And so at the end of the day a fleet of electric cars, with electricity generated by nat gas will always trump nat gas cars that burn gas direct. The only barrier that remains is improving battery technology to increase range and decrease charging times.

The American Patient: Energy

Wed, 05 Aug 2009 15:04:35 -0400

Electricity should be on top of the list for commuter vehicles. The U.S. should be working with private industry in an Apollo-moonshot type program to improve battery technology to improve range.

Electric cars have an advantage of being diversified -- the electricity can come from a portfolio of sources, e.g., nuclear, oil, natural gas, coal, solar, and so on. In addition, the electric motor is the most efficient type of motor available. Internal combustion engines waste 86% of energy as heat and friction. Electric motors only waste 30% on friction losses.

The other advantage of electric cars is we already have a widespread distribution network for electricity. Converting gasoline stations to NG stations would require an expensive and costly retrofitting.

The 'Green' Side of Natural Gas

Thu, 30 Jul 2009 11:46:04 -0400

On Jul 30 04:22 AM Freya wrote:

> If the CFTC curbs trading, how will it impact any Energy market?

By making it better. The CFTC position limits will not hamper the legitimate energy professional who needs to hedge or swap; instead, they will be targeted at the purely financial speculators who are trying to make a fast buck and who never intend to actually produce or consume physical energy.

Futures markets are vital in balancing the risks and needs of wholesale producers and consumers of any commodity. It's very important to control and limit the influence of hedge funds and hot money, so they don't distort the market and upset the equilibrium of supply and demand.

It's incredibly obvious that oil and gas hit new highs in 2008 because hedge funds and speculators bid up the prices. This, in turn, encouraged the drillers to overcapitalize, drill and produce at a faster rate than we were consuming. That's why we have a natural gas glut today.