Natural Gas Investment Boom
The trend toward relying more and more on natural gas has increased over the years in the United States. Usage in the U.S. is on target to hit 32 trillion cubic feet by year 2040, according to the U.S. Energy Information Association.
While investing in natural gas may seem like a sure thing, there are ways to maximize your success. Here are a few things to consider when investing in natural gas.
The Decline of Coal
Government legislation increasingly has negatively affected the coal industry, thus making natural gas more attractive. The EIA projects 60 gigawatts of coal-fired power plant capacity will be retired by 2020. That's a nearly 20% reduction from the 310 gigawatt production of 2012. If this downward trend continues, it could result in gas being a great bet. Watch the coal market carefully.
The U.S. has plenty of natural gas reserves. However it depends on the political climate whether or not they will be tapped. But if so, natural gas becomes a very attractive investment option.
Mild winters have a great effect on the price of natural gas. Global warming aside, if there's a particularly moderate winter, your short-term gains could be affected. Weather as a short term factor should be part of your decision-making.
Like any commodity: gold, silver, oil, etc., volatility is a built-in reality when it comes to gas. Make sure to understand this and consider that any investment you make falls in line with your risk tolerance.
The Complexity of Natural Gas Futures
With many opportunities to invest in natural gas, don't be influenced by potential returns betting on futures. This is a highly speculative market and things can change in an instant. Make sure you have the stomach and deep reserves for extreme losses in the event you decide to invest in futures.
Know All Your Options
There are a variety of investing options at your disposal: exchange-traded funds, distribution companies, futures, etc. While options abound, make sure you do your due diligence and research to ensure your money is in the best investment for you.
You can never predict the markets. Many see potential for tremendous gain in the gas market. Be sure you have the risk tolerance before you jump all in.