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Thoughts About Energy – Part II

Sigma Investment Counselors

February 21, 2013

Last July we blogged about the outlook for energy in general and natural gas more specifically, particularly with regard to the potential for significant exports of liquefied natural gas (LNG).

Now we have Japan’s Prime Minister meeting with our President to seek his support for shale gas imports to Japan. This is going to be controversial. Japan faces an energy problem with most of its nuclear power plants halted. But the US limits the export of natural gas.

Proponents of increased energy exports include energy companies, for obvious reasons, and organized labor because of the employment opportunities. Opponents include, consumer groups and companies that are significant purchasers of natural gas, due to fears that increased exports will lead to higher prices, environmentalists who are opposed to fossil fuel production in general and have concerns over the impact of fracturing on the environment and a wide range of groups opposed to expansion of port facilities to accommodate the infrastructure required for large scale exports of LNG.

While these are legitimate concerns, increasing exports has positive implications for the economy as a whole. Moreover, with an apparent significant and increasing supply of natural gas and relatively low prices, it is likely that producers will find a way to capitalize on increasing demand in Asia and Europe.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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