Nat Gas Bull Case Is Too Good Too Ignore

The best-performing group this year has been natural gas, and today's no different. I have to tell you that stories like "Georgia Judge Cites Carbon Dioxide in Denying Coal Plant Permit" in today's New York Times business section reinforces that notion, and so does the astounding 76% decline in liquefied natural gas imports in the month of April.

Both of these point to more domestic natural gas drilling and price increases that get nat gas closer to its historic 6-to-1 relationship with crude.

The Georgia judge rejection story is typical of what's out there right now. Dynegy (DYN - commentary - Cramer's Take) and LS Power, two solid outfits, were trying to get permission to build a coal plant but failed to do so because there are no regulations out there to base a decision on. That's been the story ever since Congress and the Bush administration can't agree on standards for carbon dioxide emissions.

The builders presumably need something to produce energy, and the only likely alternative is natural gas, which is much easier to permit. (It is amazing to me that these power companies keep turning to coal, as if we have a policy. When will they just turn to natural gas as a first resort now that it is cleaner and more plentiful?)

I predict an deluge of natural gas power plants as the only stopgap that can pass muster and provide consistent energy -- and it is consistent, with a price that is often cheaper when you factor in how hard it is to build a cleaner coal plant that still, in mid-build, may be stopped if there ever is a deal in Washington.

The price of that gas will go higher, though, because there isn't enough natural gas around to import as the LNG export business has grown to a halt. Short supplies internationally have killed that business.

Of course, the natural gas companies and drillers keep making new finds or finding new ways to get natural gas out of the ground. We have had find after find with horizontal drilling all over America, with Chesapeake (CHK - commentary - Cramer's Take), Devon (DVN - commentary - Cramer's Take), Apache (APA - commentary - Cramer's Take), Ultra (UPL - commentary - Cramer's Take), Anadarko (APC - commentary - Cramer's Take), El Paso (EP - commentary - Cramer's Take), Southwestern (SWN - commentary - Cramer's Take) and XTO (XTO - commentary - Cramer's Take) leading the way. So many others, too numerous to mention, have been wildcatting for natural gas, typically at a cost of $3, which is bringing a $10 profit margin, and Canada is at last drilling, and they're the Saudi Arabia of natural gas.

The complex has exhibited an astounding run. Those who think that the market can rally big -- and it should someday, given how oversold it is -- probably believe that the only way it could do so is to have an oil crash, so I can't blame those who want to hold off. There are moments, though, where the whole market is down -- see my thoughts here -- and you have a chance to buy these stocks cheaply.

I await an article, one article besides mine, that explains the resurgence in natural gas in bullish terms.

Until we get a plethora of them, this remains the most lucrative thesis I can embrace.

At the time of publication, Cramer was long Devon, El Paso, Southwestern, and XTO.

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