The spurt in domestic production has been spurred by the prolific Barnett Shale field around Fort Worth. It is expected to reach peak production in 2011, and then start its decline. There has been no discovery to replace it.
Electricity generation is the biggest demand component of gas, and even with a slowing economy, the U.S. is woefully behind the necessary construction of new power plants to meet expected demand. The excess capacity needed under normal circumstances is 125% of normal usage. We are at 117%, on our way to 112% by 2012 without new plant construction. It costs somewhere between $3000-$5000 per kilowatt hour to build a nuclear plant. There seems to be a lot of disagreement about the cost, but it assumes you can get permitted. Coal costs over $2000 per KW, and natural gas less than $900. The inescapable conclusion is gas will go higher in price.
I have talked before about the BTU equivalent stuff and David Ginther of Waddell and Reed agrees. He was early in his prediction regarding the surge in oil prices. He is guessing that gas will be north of $12 per mcf beyond 2010, vs. $9.50 or so now. I figure that the stocks are discounting about $7.50 gas and maybe $60-65 oil (against the close to $100 it's going for now.) I mentioned the other day that there are only 51 "days of usage" in worldwide storage. I should have mentioned that the five year average is 55 days. I'm late again for cocktails, more later.
Energy Insider Purchases & Buybacks: ALY 2/28/2008 3:45 PM EST This company has seen a huge purchase by one of its directors, but there isn't enough clarity here to justify a purchase.
Energy Tenaris' Pipe Dreams on Hold 2/27/2008 11:00 AM EST The company is facing some stiff competition, and I'm not sure it's up to the challenge.
Vincent Farrell Jr. is a principal of Scotsman Capital Management. Prior to joining Scotsman in April 2005, Farrell was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships. He is a regular guest on CNBC as well as other national print and broadcast media.
Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.
Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.
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