Stephen Leeb – Natural Gas: What a Difference a Year Could Make

A lot of ink has been spilled on the enormous reserve potential of the shale gas deposits. Some have argued that based on these putative enormous reserves, the country has much less to worry about should the oil doomsters be proven right. Evidently the shareholders and managements of XTO and Exxon demur. Or at least they are saying that if there are massive reserves in the shale formations there, those fields are not going to be easy to develop.

We cannot take full credit for these observations. Some goes to Matt Simmons, whom we interviewed about a year ago. His comment on the shale formations at that time was that it would take more energy to develop shale than you would get out. I must admit that at the time I just thought Matt simply had an axe to grind as he has been indefatigable in his campaign for developing alternative to fossil fuels. The dynamics of the Exxon-XTO deal strongly suggest that Matt may have been on to something.

What are the investment implications? First, there is likely a lot less natural gas in the country than most analysts believe. Shale gas is not going to be our savior. What this means is that if the U.S. economy does start to recover, natural gas is likely to become much more scarce than commonly thought. As a result, natural gas prices could indeed rise sharply