Monday, 07 November 2011 22:13

Investing in Natural Gas Transportation

Oil prices point north in the short time perspective of yet another recession averted in Europe and the US. Crude oil, of the West Texas Intermediate (WTI) type, went upwards from $77 a barrel to $93 during October and one may already see gasoline and Diesel prices hurrying to move back to the $4 mark.

"Meanwhile, even as crude oil surges, natural-gas prices remain in a funk as U.S. output surges ever higher. The broadening price differential between crude oil and natural gas could be a boon for several companies, and as I mentioned a couple weeks ago, is bringing real attention to the exploration side of the business. But another group of companies is positioned to benefit if natural gas takes off as an energy source in the transportation sector."

Starting February, the stocks of Westport Innovations (Nasdaq: WPRT) nearly doubled. This is an effect of the growing number of truck fleet operators planning to switch from diesel to Westport's natural gas retrofit technology. Prices for diesel fuel skyrocket every week, and this makes the natural gas alternative very attractive. 

A similar logic works for cars, where natural gas prices are less than $2 per gallon as compared on an equal basis with gasoline prices. And even if a gas-powered car is still more expensive to buy than a regular one, this gap will gradually close up as production volume is on the rise. 

Investing in natural gas transportation companies makes more sense so far crude oil prices remain high. With the barrel of crude returning below $70, your investment in the natural gas powered transportation industry is at risk.  

Source: - Energy Commodities... 


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