Natural Gas is very good for U.S. economy

[dan_s]

Below is cut from one of the many newsletters I get. This isn't being reported in the media, but abundant natural gas supplies and low prices are very good for the U.S. economy. The unions, if they had smart leadership, would be behind natural gas development 100% since this is what can bring a lot of manufacturing back to the U.S. - Dan

Low Natural Gas Prices Stimulate US Economy

For many years, industries that depend on natural gas as a major input have been leaving the US in search of cheaper gas supplies. These industries include chemical companies and fertilizer manufacturers. Low natural gas prices have led to resurgence in interest in projects in the US. The New York Times reported that Dow Chemical has identified 91 new manufacturing projects representing potentially $70 billion in new investments and up to three million jobs that companies have started or proposed as a result of cheap natural gas. And a report from the Yale Graduates Energy Study Group indicated that in 2010 cheap gas provided a net benefit to the US economy in excess of $100 billion.

Contrary to what you may hear via the mass media, oil demand isn't falling across the globe. It's true that demand is weaker in the U.S. and Europe, but the developed countries aren't the drivers of global growth – places like India and China continue to see strong growth in demand. Oil demand reached a new all-time record in 2011 and will hit another new all-time high this year, in my view.

As for Iran, I think that reports on the effect of geopolitical events on oil prices are widely overblown. If the situation were resolved overnight then you might see Brent crude back off to $110/bbl or so. But the real question is how tensions in the Middle East could ever be resolved overnight. I just don't see the region becoming less risky anytime soon regardless of what happens over the next few weeks. The political risk premium in oil isn't really a premium but a permanent condition.

More broadly, I think that current high oil prices are more about a tight supply/demand environment globally than anything else. They talk about Iran a great deal on TV because it's more exciting than talking about rising demand and non-OPEC oil project delays.