Future of Natural Gas

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DTalos
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Future of Natural Gas

Post by DTalos »

Do you all think the domestic and foreign demand for natural gas will increase or decrease over the next 5-10 years?

There seems to be a plethora of discussion in the media these days about energy as it relates to fossil fuels such as petroleum and coal and renewables. Natural gas is rarely mentioned.

This is not a political post and I don't intend to turn it into one.
59Gibson
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Re: Future of Natural Gas

Post by 59Gibson »

I think demand will increase in the future. Oil has been so cheap the last 7 years no need for alternatives.
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DTalos
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Re: Future of Natural Gas

Post by DTalos »

59Gibson wrote: Sat May 15, 2021 4:24 pm I think demand will increase in the future. Oil has been so cheap the last 7 years no need for alternatives.

If oil prices were to rise over the next 5-10 years, then in your opinion would natural gas demand also decline? Are the prices and demand for these two energy sources correlated?
59Gibson
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Re: Future of Natural Gas

Post by 59Gibson »

DTalos wrote: Sat May 15, 2021 4:28 pm
59Gibson wrote: Sat May 15, 2021 4:24 pm I think demand will increase in the future. Oil has been so cheap the last 7 years no need for alternatives.

If oil prices were to rise over the next 5-10 years, then in your opinion would natural gas demand also decline? Are the prices and demand for these two energy sources correlated?
To me it seems if oil prices rise beyond a certain level, possibly more attention/investment into NG would occur in the future, which could increase the use and demand. That's one line of thought.
Normchad
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Re: Future of Natural Ga

Post by Normchad »

I have no idea.

One of the big uses for natural gas is in electricity production. In 2019, 38% of electricity production was done with natural gas. According to my 10 seconds on google.

So it probably depends a lot of what you think will happen with electricity production in the future. Wind and solar are growing quickly at utility scale. How much of a dent would that make in the time frame you’re asking about, I don’t know.
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FIREchief
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Re: Future of Natural Gas

Post by FIREchief »

Fifty years ago we were worried about air pollution. So, technology reduced it greatly to clean up the air. Thirty years ago we were worried about destroying the Ozone. So, technology to eliminate VOCs reduced it greatly. Now we're worried about global warming due to carbon emissions (of which NG is a contributor). If history repeats, technology may very well reduce the demand for all carbon generating fuels. Solar and wind are in vogue now, but other things such as wave, geothermal and even nuclear fusion may be part of our future. There may yet be untapped hydroelectric opportunities that could emerge.
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Jack FFR1846
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Re: Future of Natural Gas

Post by Jack FFR1846 »

Demand will go up. Think of any coal plant that's converted to something else. Of all of them I can think of, they either converted to natural gas or have been decommissioned.
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DurangoWino
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Re: Future of Natural Gas

Post by DurangoWino »

Definitely NG usage and demand will rise. LNG will become a big export for US.
SpideyIndexer
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Re: Future of Natural Gas

Post by SpideyIndexer »

I was musing a related question. Which will rise in price more quickly, NG or electricity? This could affect the decision whether to install a new gas furnace or a heat pump (or dual-fuel system.)

The answer must be NG. Though there are several methods to obtain it, bottom line is that it is a non-renewable resource.
Boglegrappler
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Re: Future of Natural Gas

Post by Boglegrappler »

One of the things that you don't know if you haven't been familiar with the industry is that, on an energy equivalent basis, a barrel of oil is equivalent to about 8 mcf of natural gas. But, historically, natural gas always sold at a discount to that, usually about 1/10 of the price of a barrel of oil, plus or minus, instead of the energy equivalent 1/8th.

Over the past 15 or so years, presumably because of enhanced recovery through hydraulic fracturing and other improved recovery techniques, gas supply has increased such that the price relationship with oil has been disrupted, and gas now sells for about half of what it did before, or about 1/20th the price of a barrel of oil.

While they are not technically direct substitutes, the low price of gas and the fact that it burns rather cleanly means that there is a strong future for it, in my opinion.
egrets
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Re: Future of Natural Gas

Post by egrets »

Boglegrappler wrote: Sun May 16, 2021 6:55 am While they are not technically direct substitutes, the low price of gas and the fact that it burns rather cleanly means that there is a strong future for it, in my opinion.
I hope so. After courting pneumonia, me and my cat, in a five day winter power outage, I shelled out for a natural gas Generac generator. Then I start hearing natural gas being dissed.

I do wonder about the effect of fracking on supply, though. I never hear anything but bad stuff about fracking - earthquakes, ground water pollution, so I wonder if its days are numbered.
mgensler
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Re: Future of Natural Gas

Post by mgensler »

We're in the process of going carbon neutral for our home. We're air sealing and insulating first. Removing the gas furnaces and replacing with mini-split heatpumps next. We're putting in solar thermal as well. We will evaluate our energy usage in a year and then install PV panels to cover our usage.

Our city is also investing in a solar farm that will cover 100% of city usage by the fall.

On the other hand, our utility company is converting from coal to natural gas for electric generation.
Zeno
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Re: Future of Natural Gas

Post by Zeno »

I know a few things about this topic, or at least I think I do. The usual caveat applies: nobody knows what the energy future will be, including me. As I work in the field, however, here are my observations:

1. Fossil fuels generally are under tremendous pressure for two reasons. First, economically, renewable fuels are in fact less expensive in a growing number of applications. There are raging debates about which metric(s) to use when comparing the economics of certain fuels (e.g., LCOE), of course. And for electricity generation many would argue that those economics don't account for reliability and other non-economic attributes. Nonetheless, fossil fuels are competing with other energy sources whose prices are improving, day by day. Because of the hydraulic fracturing boom, natural gas prices in recent years have been exceedingly low, however, which has challenged the industry greatly. See, e.g., Chesapeake Energy.

The second reason is policy: under the Paris Agreement, effectively all fossil fuels are to be decarbonized by mid-century, which for a energy system is "tomorrow" as energy infrastructure generally lasts for decades. These low-carbon policies exist at the federal, regional and state levels in the United States, too; and they generally are bipartisan. Lots of research is underway to decarbonize natural gas with technologies such as carbon capture & storage (CCS) and carbon capture, utilization & storage (CCUS).

Natural gas is methane, of course, which is a short-lived but potent greenhouse gas (GHG). It is better at trapping heat than CO2, which is a longer-lived GHG.

Hydrogen is being discussed as a possible replacement or co-blend fuel with NG. Why? Again, carbon content. A former coal-fired power plant in Utah is being repurposed to co-fire a blend of H2 and CH4. Lots of research in this area, including the ability of transport H2 in existing CH4 pipelines (there are limits).

2. Fossil fuel usage depends on the market. For natural gas, those markets include electricity generation, industrial, home heating, transportation and exports. Those markets in turn break out by region.

A. Electricity Generation

Coal-fired power plants are retiring; no new coal plants are slated to be built in the US. The last coal-fired power plant was commissioned in the US in circa 2011. Generally, in the eastern US, coal-fired power is being converted to natural gas. In the western US, generally coal-fired power is being retired and related with wind, solar and grid-scale storage (planned). As a general observation, fuel switching is occurring the east; not the west.

B. Industrial

Natural gas enjoys lots of industrial uses; that is unlikely to change any time soon.

C. Home Heating

As a general observation and in some parts of the country, efforts are underway to replace natural gas for home heating with electricity, particularly for new construction (via zoning ordinances). Why? Electricity is understood to be easier to decarbonize than natural gas. If this transition sticks, which is unclear, it is going to play out over many decades, maybe even century-scales.

D. Transportation

Natural gas exists as a niche transportation fuel (e.g., compressed natural gas). My sense is that market is unlikely to grow, as folks pivot towards EVs. I don't see NG usage growing significantly as a transportation fuel. NG has been touted as a transportation fuel for many decades, and with the exception of some buses in major urban areas and with the support of Clean Air Act provisions/programs, it has never really stuck. I'm not bullish on NG as a transportation fuel. I could be wrong, and likely am.

E. Exports

Over the past decade, the planned LNG import terminals were repurposed to LNG export terminals in the US, again due to the flood of HF-induced natural gas. Unless that export spigot is trimmed for policy reasons (e.g., the Paris Agreement) exports are likely to continue to boom. Countries like China don't have a lot of natural gas.

3. A final comment about the energy transition: a literal mountain of books has been written about the topic. One of the top scholars, in my opinion, is Vaclav Smil. Smil points out that energy transitions generally play out on century-scales, with the time frame dependent upon a lot of factors, including, of course, economics, societal acceptance, and how deeply embedded the incumbent fuel(s) is in society. Sometimes they go quickly, however. Given that natural gas is so deeply embedded in society, with perhaps hundreds of billions (maybe even more) in infrastructure and with natural gas feeding into nearly every building in America, it is hard to envision the day when all of that goes poof. Could natural gas be out of favor by the year 2200? Maybe. By the year 2100? Highly unlikely. Anything can happen, however.

+++

Tl;dr: NG remains under economic and policy pressures. My sense is that crude oil is where coal was 15 years ago, and with natural gas further behind by some distance more. These economic and policy pressures are unlikely to dissipate. These trends are visible now in higher education in departments such as petroleum engineering and geology, where incoming students are asking if they will have jobs when they are 50 years old if they get such degrees. Students are looking out 30 to 40 years, so perhaps that is one benchmark.

As a late career investor though, I'm more worried about the ability of energy companies to make money given the flood of natural gas on the market due to hydraulic fracturing than I am it going poof over any reasonable time horizon. I'm also tracking new energy technologies, such as grid-scale storage and the like.
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runner26
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Re: Future of Natural Gas

Post by runner26 »

California is moving towards eliminating nat gas in new home construction. Some California counties are even moving more aggressively than the state.
rustymutt
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Re: Future of Natural Gas

Post by rustymutt »

runner26 wrote: Sun May 16, 2021 9:02 am California is moving towards eliminating nat gas in new home construction. Some California counties are even moving more aggressively than the state.
I had read that all new homes being built in California, are Net-Zero ready quality.
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Normchad
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Re: Future of Natural Gas

Post by Normchad »

WyomingFIRE wrote: Sun May 16, 2021 8:00 am I know a few things about this topic, or at least I think I do. The usual caveat applies: nobody knows what the energy future will be, including me. As I work in the field, however, here are my observations:

1. Fossil fuels generally are under tremendous pressure for two reasons. First, economically, renewable fuels are in fact less expensive in a growing number of applications. There are raging debates about which metric(s) to use when comparing the economics of certain fuels (e.g., LCOE), of course. And for electricity generation many would argue that those economics don't account for reliability and other non-economic attributes. Nonetheless, fossil fuels are competing with other energy sources whose prices are improving, day by day. Because of the hydraulic fracturing boom, natural gas prices in recent years have been exceedingly low, however, which has challenged the industry greatly. See, e.g., Chesapeake Energy.

The second reason is policy: under the Paris Agreement, effectively all fossil fuels are to be decarbonized by mid-century, which for a energy system is "tomorrow" as energy infrastructure generally lasts for decades. These low-carbon policies exist at the federal, regional and state levels in the United States, too; and they generally are bipartisan. Lots of research is underway to decarbonize natural gas with technologies such as carbon capture & storage (CCS) and carbon capture, utilization & storage (CCUS).

Natural gas is methane, of course, which is a short-lived but potent greenhouse gas (GHG). It is better at trapping heat than CO2, which is a longer-lived GHG.

Hydrogen is being discussed as a possible replacement or co-blend fuel with NG. Why? Again, carbon content. A former coal-fired power plant in Utah is being repurposed to co-fire a blend of H2 and CH4. Lots of research in this area, including the ability of transport H2 in existing CH4 pipelines (there are limits).

2. Fossil fuel usage depends on the market. For natural gas, those markets include electricity generation, industrial, home heating, transportation and exports. Those markets in turn break out by region.

A. Electricity Generation

Coal-fired power plants are retiring; no new coal plants are slated to be built in the US. The last coal-fired power plant was commissioned in the US in circa 2011. Generally, in the eastern US, coal-fired power is being converted to natural gas. In the western US, generally coal-fired power is being retired and related with wind, solar and grid-scale storage (planned). As a general observation, fuel switching is occurring the east; not the west.

B. Industrial

Natural gas enjoys lots of industrial uses; that is unlikely to change any time soon.

C. Home Heating

As a general observation and in some parts of the country, efforts are underway to replace natural gas for home heating with electricity, particularly for new construction (via zoning ordinances). Why? Electricity is understood to be easier to decarbonize than natural gas. If this transition sticks, which is unclear, it is going to play out over many decades, maybe even century-scales.

D. Transportation

Natural gas exists as a niche transportation fuel (e.g., compressed natural gas). My sense is that market is unlikely to grow, as folks pivot towards EVs. I don't see NG usage growing significantly as a transportation fuel. NG has been touted as a transportation fuel for many decades, and with the exception of some buses in major urban areas and with the support of Clean Air Act provisions/programs, it has never really stuck. I'm not bullish on NG as a transportation fuel. I could be wrong, and likely am.

E. Exports

Over the past decade, the planned LNG import terminals were repurposed to LNG export terminals in the US, again due to the flood of HF-induced natural gas. Unless that export spigot is trimmed for policy reasons (e.g., the Paris Agreement) exports are likely to continue to boom. Countries like China don't have a lot of natural gas.

3. A final comment about the energy transition: a literal mountain of books has been written about the topic. One of the top scholars, in my opinion, is Vaclav Smil. Smil points out that energy transitions generally play out on century-scales, with the time frame dependent upon a lot of factors, including, of course, economics, societal acceptance, and how deeply embedded the incumbent fuel(s) is in society. Sometimes they go quickly, however. Given that natural gas is so deeply embedded in society, with perhaps hundreds of billions (maybe even more) in infrastructure and with natural gas feeding into nearly every building in America, it is hard to envision the day when all of that goes poof. Could natural gas be out of favor by the year 2200? Maybe. By the year 2100? Highly unlikely. Anything can happen, however.

+++

Tl;dr: NG remains under economic and policy pressures. My sense is that crude oil is where coal was 15 years ago, and with natural gas further behind by some distance more. These economic and policy pressures are unlikely to dissipate. These trends are visible now in higher education in departments such as petroleum engineering and geology, where incoming students are asking if they will have jobs when they are 50 years old if they get such degrees. Students are looking out 30 to 40 years, so perhaps that is one benchmark.

As a late career investor though, I'm more worried about the ability of energy companies to make money given the flood of natural gas on the market due to hydraulic fracturing than I am it going poof over any reasonable time horizon. I'm also tracking new energy technologies, such as grid-scale storage and the like.
Wow, such a great post. Thank you! I learned a bunch of new stuff from this.
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ClevrChico
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Re: Future of Natural Gas

Post by ClevrChico »

A good part of the country would freeze to death without natural gas in the winter. Geothermal could cut that, but it's expensive to put in, and still requires auxiliary heat here too.

I see few alternatives to change that in the near future.
MrCheapo
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What is a legitimate alternative to fossil fuels, that is the question!

Post by MrCheapo »

Great Topic OP!

tldr: My key point is that an alternative is needed, but none of the current alternatives are viable at scale so gas and oil will be with us for a while to come.

I have been thinking about this a lot since I bought a lot of oil and energy gas stocks last year very cheaply. They have since doubled in price and yielding 10% so I'm caught in the situation of either: i) Selling off and taking some nice profits or ii) Holding on and taking some nice dividends for years to come.

There are lots of good points on this thread but the key issue to me is what is the real alternative to gas and oil? Clearly fossil fuels is causing climate change (even the oil companies agree) but the US economy needs reliable and cheap energy to continue. What is that alternative?

Take for instances electric cars. The dilemma is that your gasoline tank is a effectively a very cheap to make "battery" (no lithium just some cheap metals) that is easily rechargeable (go to the gas pump). I'm in CA and there are some nice political ads of what's going to happen in a huge traffic jam if electric cars start to run out of electricity and are stranded? You can't easily recharge a huge battery in the middle of a highway. Personally, I think the idea of a grid-charged electric car is a really bad idea. It takes ages to recharge your car even on a 240V charger, even the Tesla super chargers take an hour. So I don't see these being widely adopted due to inconvenience. Toyota is selling the Mirai which is a hydrogen fueled electrical car (it creates electricity on board via hydrogen reaction). That seems like a legitimate alternative, but is not very well regarded.

The same dilemma can discussed in terms of home heating, electricity etc. Electrical supply for industries and homes is particularly troubling. The core idea as I understand it is to create a huge "interstate" highway so electricity can be transported from Texas to NY, from Wyoming to CA. This is critical because solar, wind etc is extremely problematic. What happens if its windless and cloudy in CA and Google needs to power its server farm? Given these modern times where the US is so divided, the idea of all states coming together and agreeing to "bail each other out" (even at a cost) seems far fetched, let along the cost of building this "electrical" highway system.

So in conclusion oil and gas is likely to be the dominant energy source for at least another decade unless some revolutionary alternative energy comes along. This is due to: i) Fossil fuels cause climate change so an alternative is needed, ii) The current alternatives (wind, solar) will rely on a huge electrical highway which is unlikely to be built or be successful, iii) The electrical cars with batteries on them are too inconvenient for all of us to use at scale.
Last edited by MrCheapo on Sun May 16, 2021 10:24 am, edited 2 times in total.
Topic Author
DTalos
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Re: Future of Natural Gas

Post by DTalos »

WyomingFIRE wrote: Sun May 16, 2021 8:00 am I know a few things about this topic, or at least I think I do. The usual caveat applies: nobody knows what the energy future will be, including me. As I work in the field, however, here are my observations:

1. Fossil fuels generally are under tremendous pressure for two reasons. First, economically, renewable fuels are in fact less expensive in a growing number of applications. There are raging debates about which metric(s) to use when comparing the economics of certain fuels (e.g., LCOE), of course. And for electricity generation many would argue that those economics don't account for reliability and other non-economic attributes. Nonetheless, fossil fuels are competing with other energy sources whose prices are improving, day by day. Because of the hydraulic fracturing boom, natural gas prices in recent years have been exceedingly low, however, which has challenged the industry greatly. See, e.g., Chesapeake Energy.

The second reason is policy: under the Paris Agreement, effectively all fossil fuels are to be decarbonized by mid-century, which for a energy system is "tomorrow" as energy infrastructure generally lasts for decades. These low-carbon policies exist at the federal, regional and state levels in the United States, too; and they generally are bipartisan. Lots of research is underway to decarbonize natural gas with technologies such as carbon capture & storage (CCS) and carbon capture, utilization & storage (CCUS).

Natural gas is methane, of course, which is a short-lived but potent greenhouse gas (GHG). It is better at trapping heat than CO2, which is a longer-lived GHG.

Hydrogen is being discussed as a possible replacement or co-blend fuel with NG. Why? Again, carbon content. A former coal-fired power plant in Utah is being repurposed to co-fire a blend of H2 and CH4. Lots of research in this area, including the ability of transport H2 in existing CH4 pipelines (there are limits).

2. Fossil fuel usage depends on the market. For natural gas, those markets include electricity generation, industrial, home heating, transportation and exports. Those markets in turn break out by region.

A. Electricity Generation

Coal-fired power plants are retiring; no new coal plants are slated to be built in the US. The last coal-fired power plant was commissioned in the US in circa 2011. Generally, in the eastern US, coal-fired power is being converted to natural gas. In the western US, generally coal-fired power is being retired and related with wind, solar and grid-scale storage (planned). As a general observation, fuel switching is occurring the east; not the west.

B. Industrial

Natural gas enjoys lots of industrial uses; that is unlikely to change any time soon.

C. Home Heating

As a general observation and in some parts of the country, efforts are underway to replace natural gas for home heating with electricity, particularly for new construction (via zoning ordinances). Why? Electricity is understood to be easier to decarbonize than natural gas. If this transition sticks, which is unclear, it is going to play out over many decades, maybe even century-scales.

D. Transportation

Natural gas exists as a niche transportation fuel (e.g., compressed natural gas). My sense is that market is unlikely to grow, as folks pivot towards EVs. I don't see NG usage growing significantly as a transportation fuel. NG has been touted as a transportation fuel for many decades, and with the exception of some buses in major urban areas and with the support of Clean Air Act provisions/programs, it has never really stuck. I'm not bullish on NG as a transportation fuel. I could be wrong, and likely am.

E. Exports

Over the past decade, the planned LNG import terminals were repurposed to LNG export terminals in the US, again due to the flood of HF-induced natural gas. Unless that export spigot is trimmed for policy reasons (e.g., the Paris Agreement) exports are likely to continue to boom. Countries like China don't have a lot of natural gas.

3. A final comment about the energy transition: a literal mountain of books has been written about the topic. One of the top scholars, in my opinion, is Vaclav Smil. Smil points out that energy transitions generally play out on century-scales, with the time frame dependent upon a lot of factors, including, of course, economics, societal acceptance, and how deeply embedded the incumbent fuel(s) is in society. Sometimes they go quickly, however. Given that natural gas is so deeply embedded in society, with perhaps hundreds of billions (maybe even more) in infrastructure and with natural gas feeding into nearly every building in America, it is hard to envision the day when all of that goes poof. Could natural gas be out of favor by the year 2200? Maybe. By the year 2100? Highly unlikely. Anything can happen, however.

+++

Tl;dr: NG remains under economic and policy pressures. My sense is that crude oil is where coal was 15 years ago, and with natural gas further behind by some distance more. These economic and policy pressures are unlikely to dissipate. These trends are visible now in higher education in departments such as petroleum engineering and geology, where incoming students are asking if they will have jobs when they are 50 years old if they get such degrees. Students are looking out 30 to 40 years, so perhaps that is one benchmark.

As a late career investor though, I'm more worried about the ability of energy companies to make money given the flood of natural gas on the market due to hydraulic fracturing than I am it going poof over any reasonable time horizon. I'm also tracking new energy technologies, such as grid-scale storage and the like.

Excellent analysis and summary!!!

Thank you for posting.
BogleFan510
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Re: Future of Natural Gas

Post by BogleFan510 »

Demand will depend on price, IMHO.

The supply side of the industry is quite capable of finding supply when needs arrive.

On the demand side, public utilities and other historically 'flat demand curve' entities are increasingly showing some ability to flex. Customers will probably move slowly to electric hybrid water heaters in some markets to electric heat, as solar continues to grow share of the overall energy supply and homeowners produce for themselves. CNG vehicle fleets dont seem to have the momentum we thought they might gain in the 80s, though they seem to be doing ok in public transit.

Edit I see a much better summary (above) got posted just as I was typing. Nice summary.
absolute zero
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Re: Future of Natural Gas

Post by absolute zero »

Both the IEA (International Energy Administration) and the EIA (Energy Information Administration) employ lots of people who study this question for a living, and both organizations publish long term energy demand outlooks that extend to 2050. The future is uncertain, but if you're interested in this topic then I'd suggest taking a look at the studies that they publish. I believe they update them annually.
MrCheapo
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Re: Future of Natural Gas

Post by MrCheapo »

Thanks for the summary but there are a few other issues:

i) Natural gas is used predominantly for producing electricity.
ii) Electricity production from solar and wind is a great idea but logistically there are significant challenges. What happens if its windless and cloudy in CA? Who powers Google's servers
iii) The solution to ii) is to build a gigantic electrical superhighway way that spans states so if TX would ship excess electricity to CA. But given the political angst between states and the cost of such an infrasucture I think its unlikely to be successful.

To be clear, I think an alternative is needed as fossil fuels are causing climate change but the current solutions are not viable at scale.
WyomingFIRE wrote: Sun May 16, 2021 8:00 am I know a few things about this topic, or at least I think I do. The usual caveat applies: nobody knows what the energy future will be, including me. As I work in the field, however, here are my observations:
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Flyer24
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Re: Future of Natural Gas

Post by Flyer24 »

Thread is getting off topic for investing with some
discussion around climate change. Topic is locked.
Locked