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How To Play The Prolonged Bull Run In Natural Gas

Since the Russian invasion of Ukraine last month, a lot has been said and written in the U.S. about the impact of that and the subsequent sanctions on the price of oil. From a media perspective, that makes sense because Americans have an abiding interest in the price of gasoline. The sheer size of the country and its relative wealth mean that Americans drive a lot, and that wealth combined with relatively low fuel prices means that they often drive trucks and other vehicles that are far from fuel efficient. In that situation, gas at over $4 per gallon is big news, so oil over $100/barrel is too.

However, far less coverage is given to price moves in another commodity, natural gas, that has also strengthened on the war in Ukraine and the response to it and that in some ways has a more wide-reaching impact on the economy than oil. In 2021, according to the official Energy Information Administration (EIA) figures, natural gas powered plants accounted for 38.3% of electricity generation in America, making it by far the most important fuel source for power generation. Yes, oil prices impact a lot of goods because of transportation costs etc., but just about everything we do in the modern world consumes electricity, so a big jump in the price of a key resource in that area should probably be bigger news than it is.

In part, the lack of media attention on natty is probably because, as the 10-year chart above shows, extreme volatility in the market is nothing new.…

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