A natural gas boom is coming in the U.S., CNBC reported Thursday. But while consumers are likely to benefit from the cheap energy source, investors may not.
In the past three years, with the help of new drilling technology, huge reserves of domestic natural gas have been discovered -- enough to produce a 100-year supply of cheap, cleaner-burning fuel at current rates of consumption, says CNBC, citing experts.
While this sounds like great news for investors in the field, the two major obstacles facing the industry -- low prices stemming from vast supplies and a push toward renewable energy -- could put a dent in their high hopes.
40% of U.S. Energy by 2040
Indeed, many energy experts and government officials see natural gas only as a transitional energy source to be used as a bridge while the country moves from foreign oil and dirty coal to renewable biofuels and carbon-free energy powered by wind, solar and nuclear sources, CNBC adds. To wit, the government is giving great subsidies to renewable energy development.
Still, tremendous growth is expected for natural gas use for the next few decades. Despite being a fossil fuel, natural gas is a cleaner-burning than coal or petroleum, and with policies in place to reduce carbon emissions, many would convert to it as a fuel source. A study performed by researchers at Massachusetts Institute of Technology projects natural gas will rise from providing 20% of the nation's energy to 40% in 2040 before falling off as renewable sources gain ground.
As a long-range investment play, natural gas would seem secure, CNBC writes, even if the near-term growth has stalled. If someone wanted to invest in the sector, however, exploration and production companies might not be the best choice. Buying shares in drillers, machinery manufacturers, infrastructure companies, service providers, etc., might be the better bet, stock analyst Alan Brochstein told CNBC.
Natural Gas Boom: Cheap, Clean Fuel Presents a Problem for Investors