Feb 11, 2013
Think the Shale Gas Boom is a No-Brainer for Investors? Think Again
For the past 40 years, those in the US have been regaled by politicians about the need to rid the nation of the dependency on foreign oil, all the while operating a foreign policy built solely around the securing and maximizing of the flow of said foreign oil to the US. Now that Energy Return on Energy Invested (ERoEI) has become a topic of real interest, and the structural price for a barrel of oil equivalent (BOE) is firmly in the $100 per barrel range, the unlocking of various unconventional or tight supplies of oil and gas are not only economically viable, but are creating a production glut that current infrastructure cannot keep up with. This has resulted in the crash of US natural gas prices and the widening of the price spread between West Texas Intermediate Crude (AMEX:$USO) and Brent Crude (AMEX:$BNO).
These massive changes in US production are causing massive changes within the greater energy market. It’s created a massive arbitrage between the US and the rest of the liquid natural gas-using world, so much so that pressure is mounting to allow exports of LNG, which would be a huge boon to global growth, allowing that cheaper energy to disperse through the global market and keep a lid on LNG prices. Normally, something like this would be a boon to the world at large, but political reality is far different than market reality. As always, the two are in direct conflict with each other.
