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Monday, August 31, 2009

Natural Gas Naturally

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A couple of articles caught my eye this weekend as I read Barron's [August 31 print version].

First was an article about gasoline consumption [p.23 ... abbreviated online version here]. As noted in the article,

"U.S. gasoline consumption fell more than 7% from its 2007 peak in the first quarter, before rebounding slightly in the second. Yes, that in part reflects the effects of the punishing economic downturn. But the sliump actually has maked the beginning of a profound, long-term shift that will affect oil and auto stocks for years. Thanks to a confluence of factors - a legislative push to wean the nation of foreign oil, an end to very cheap fuel, a global rush toward fuel-efficient cars, fewer people driving to work and more citizens becoming concerned about the environment - U.S. gasoline consumption might never surpass the high of the summer of 2007, when we guzzled 400 million gallons a day."
The article continued to relate how pricing of oil will remain high... "$3 or more might be the new norm"... and how consumers are "having second and third talks about buying that huge all-wheel-drive Toyota Sequoia[!]." Most of the rest of the article was about the impact on refiners [this is a publication about investing after all].

Farther into the newspaper was another article speculating about the various various natural gas related funds and companies making devices for the natural gas market [page 33 ... abbreviated online version here].

"The plan is to offer tax credits worth up to $12,500 on the purchase of new cars and trucks. The catch is that your new vehicle must run on natural gas -- compressed natural gas, or CNG, to be precise. A Senate bill, the counterpart to the House's NAT GAS Act, also would offer up to $64,000 in tax credits on fleet vehicles, and up to $100,000 to anyone opening a CNG filling station."

The article went on to state that, "Washington is beginning to wake up to the value of using this plentiful, home-grown fuel for transportation - and that in turn could open up some intriguing investment opportunities."

It looks as if someone at Barron's has been reading this blog:

The Natural Gas Fuel Alternative For Trucks
May 31, 2009

I also wrote that if the EPA gave each non-petroleum fueled vehicle an arbitrary rating of 150 mpg that the standard might be met with a full push toward compressed natural gas powered vehicles (CNG). There is precedent within the ....

Declaring 30 MPG Or 35 MPG Makes Little Difference
May 28, 2009

So, if the vehicle runs on hydrogen fuel cells or natural gas or propane or just plugs into the wall, they get the manufacturer a credit of 150 mpg per vehicle against the mandated 30 mpg in 2016, 35 mpg in 2020, 40 mpg in 2025, ....
Given the propensity of Congress and the Obama administration to look for high-cost alternatives to oil, it might be to our advantage to look for less exotic and less expensive alternatives... such as natural gas.
..

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CO2 Cap and Trade

There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates

FEDERAL RESERVE & HOUSING

SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006 Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."
http://www.reuters.com/

December 11, 2007 Somehow the Fed misses the obvious.
fed_rate_moves_425_small.gif
[Image from: CNNMoney.com]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's Economy.com. "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)