Saturday, January 18, 2014

natty update

Natural gas spot prices "seems" to be holding the zone between $4 and $4.50.

I say "seem", because although at the moment the country is still well-supplied, there have been numerous reported local crises where utilities have been forced to pay $20, $40, even in one case $100 per million cubic feet, while many others have switched temporarily to kerosene.

The problem at the moment is all the NIMBY folk who rationalize their behavior with all this hocus pocus about global warming.  Their real motivation to blocking all pipeline construction has been pure antisocial selfishness.  The country does not have enough pipelins for a good distribution system.  Worse, as reported recently in The Washington Post, some local pipelines are aging and decrepit to the point of resembling sponges more than tin cans.  Twelve manholes were discovered to have a concentration of leaked gas sufficient to explode.  After reporting this to the local gas company and then going back to recheck four months later, all twelve were STILL ready to explode.

The one "polar vortex" (after many weeks of below average temperatures) brought about a serious depletion in the national inventories.  Any investor with a grain of imagination can look at the chart and project the serious potential for the little blue line to get down so low that spot shortages, so far isolated to unimportant districts likie New York City and Boston, could become more widespread.

Now, going back to the weather map and only looking at the forecasts for the next ten days, we have , surprise surprise, ten days of continuing very cold, below-average temperatures, continent-wide.

Some of my fellow investors have reported patterns of trading similar to the patterns of paper gold and paper silver and, dare we say it, the LIBOR.  Somebody or some entity takes the opportunity, when trading is thin, as say, at 4:00 in the morning Eastern Standard Time or, fifteen minutes BEFORE the weekly inventory report comes out, to sell large blocks and blow away people's stops.  This sort of activity has the effect of maximum loss for the entity doing this.  One does have to wonder.

The U.S.S.R had centrally-dictated pricing for most of its existence.  They successfully eschewed inflation.  However, they successfully eschewed a smooth supply chain and ready availability of key products.  When a shipment of right shoes did arrive people had to line up for several blocks to hope to get one.  Without ever knowing if they would ever have a chance for left ones or not.

It indeed is beginning to look to me that there could be some serious shortages later on in February.  Since all that coal generating capacity has been shut down and can't be restarted, we could have some critical brown outs, black outs, and empty gas pipes leading to burst pipes, frozen homes and offices, numbers of dead homeless folk and older people and babies and, one can only hope, some Wall Street traders and Central bankers getting "stiffed" ...

Thank God I heat with wood.  There seems to be a good supply. 

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