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0 Nov 4 2010 @ 8:20am by Matt Smith in energy consulting, Global Energy, Natural Gas, risk management

File Under: Funny / Interesting

This entertained me tremendously. Last week the below message came into the Summit Energy website on a ‘contact us’ form. I’m still not quite sure what I’d said to provoke it, but for someone to hunt me down because they felt strongly enough about a topic, I figured they must have something interesting to say. They did:

‘Re Matt Smith and natural gas. As a seasonal indicator here in Miami, FL I use the arrival of the turkey vultures from Youngstown, OH to signal the arrival of cold weather in Ohio. They have been late this year, but have finally begun to appear in small numbers. Birds and animals have very keen senses outside the scope of human perception, e.g. earthquakes, which should be taken into account for forecasting weather, in addition to the traditional scientific metrics. As such, the turkey vultures have been late this season meaning the onset of cold weather was delayed, but is finally arriving. I’m very bullish on the uses, not prices, of natural gas. Low natural gas prices have put a damper on wind power, nuclear reactors, solar power, coal usage, etc. and will affect the companies supplying those industries, i.e. Vesta. But heavy feedstock and energy users such as chemical, paper, aluminum, should do great. It could be a rebirth of the rust belt. In addition the potential of LNG is huge in the transportation area. Cheap energy is VERY, VERY bullish for the USA.’

The above was written by Leonard Kreicas; I contacted him to get his permission to publish his words, and he kindly agreed. While his insight into turkey vultures appeared a little quirky (although watching Punxsutawney Phil is obviously fine, while the predictive power of wooly worms is not to be questioned), he makes some solid points in his commentary.  

In the same way that low oil prices would put a damper on renewable fuels (Saudi Arabia’s oil minister Ali al-Naimi highlighted this issue just this week), Leonard is right when he says low natural gas prices have caused fuel-switching from coal, and are impacting investment in green energy such as wind or solar. But while we here at Summit Energy realize the crippling impact that high energy costs can have, it is not possible to conclude that low energy costs will have the reverse effect. There are much bigger issues at play in today’s economy, and although cheap energy would be a huge help in encouraging a recovery in the industrial sector, we need to see increased demand for products, and this will only be driven by more jobs, a stable housing market, and a more confident consumer.  I’ll compromise, Leonard; cheap energy is part of the medicine, but not the cure for the USA, so it can only be a somewhat bullish influence. 

To follow on from this, I received the below response to a burrito post which appeared on Seeking Alpha.  I posted it as a comment and responded to it there. This also helps to answer in part Leonard’s question above.

‘Hey Energy, if things are so cheap and in such great excess why don’t natural gas producers get this stuff used in more homes, more cars and more factories. Surely the cost of using NG would be a heck of a lot cheaper than using gasoline and oil. This is the problem with gold and natural gas, the producers have not utilized the potential of the product and pushed for more uses. Gold can be stretched into a wire that would reach the moon but what do we use it for, jewellery. Natural gas would ease our need for oil but what do we do, continue to pay $79.00 a barrel for the black stuff and pollute our planet in the interim. Is it not free enterprise that NG has more of a future? What say you Burrito?’

To which I responded:

‘As the chart illustrates, natural gas producers are producing as much as they can – hence record high levels. Yes, natural gas has a rosy future, but to extend its use to mass transport and all facilities would require both technological advancement and a massive push on the infrastructure front. Also, do not forget that 30% of power generation in the US already comes from natural gas as an input fuel.’

I guess the main point of all this is to say it is great to be able to write what I want, but it is also cool for people to question you – especially if they have a valid point to make. So thanks to Mr Kreicas for hunting me down last week; his comments not only got me thinking, but taught me a thing or two about turkey vultures. Cheers.  


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