Since the industrial revolution, growing economies around the world have turned to fossil fuels for a relatively cheap power source. This dependence on non-renewable resources has only increased in the past few decades, but so have the environmental arguments against them. One of the biggest arguments against burning fossil fuels is the harmful emissions that come as a side effect. But while many lump all fossil fuels together as being “dirty” energy sources, one stands out from the rest: natural gas.
Natural Gas: The Clean Solution
With recent developments in hydraulic fracturing (aka fracking) and horizontal drilling, natural gas has become one of the most abundant resources in North America overnight. These advancements in extraction are making NG a cheap and viable solution, and its use over other resources has played a huge part in the lowering emissions.
Despite being a fossil fuel, NG is significantly cleaner than the popular alternatives, only producing two-thirds of the emissions that crude oil produces and almost half that of coal. The Economist reported
earlier this month that “on a per capita basis, carbon dioxide emissions from power stations are now at their lowest since President Eisenhower left office in 1961.”
While NG has helped lower emissions, not everyone is pleased with this development. Current fracking techniques
have been heavily debated by environmentalists around the world, and in the United States the practice is currently exempt from the Clean Air Act, Clean Water Act, and many others. As fracking becomes more efficient and less harmful to the environment, the proof is there that NG could be held to these national standards and be a safer alternative to crude oil.
What This Means for Natural Gas Investors
While an increased demand will likely help give prices a bit of a boost, the ever-increasing supply will likely keep prices from getting too high. Investors wishing to make a long-term play on the commodity would be better served investing in producers such as Exxon Mobil
(NYSE:XOM) or Devon Energy
(NYSE:DVN), rather than the commodity itself.
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Editor's note: This article by Carolyn Pairitz was originally published on Commodity HQ.
No positions in stocks mentioned.