You may remember the incredibly long lines for the gas pump back in the early 70s.
I was just a toddler myself, but my parents and grandparents were among the ones waiting in the endless gas lines.
It all started in the fall of 1973 when the Middle East oil producers cut off America’s oil supply. Can you imagine? Suddenly hundreds of thousands of barrels of oil just stopped flowing into the U.S.
Oil prices soared, and the lines started forming at gas stations across America. In fact, prices climbed so high so fast that it sparked a recession here in the United States. It also caused one of the worst bear markets in stocks since the Great Depression.
After the dust settled, the U.S. decided to take action to ensure this never happened again. Authorities built up U.S. oil reserves to help to guard against oil supply disruptions in the future.
Today, the U.S. has 4.1 billion barrels of oil in strategic reserves (1.7 that is directly controlled by the government).
Now China is following our lead. But there’s another commodity that’s even more important to China than oil.
These new Chinese reserves practically guarantee oil will rally this year. Let me explain…
The Energy Reserve of the Future
China just completed their first phase of strategic oil reserves in 2009. In fact, at the end of 2010, they had roughly 346 million barrels of oil tucked away in reserves. This would give China oil for about 36 days.
But there’s one thing that is even more important to China than oil…natural gas.
In 2000, residential consumption of natural gas rose 18%. In 2009, consumption rose 43%. By the year 2015, they estimate that consumption will rise 77%! So needless to say, China is falling in love with this cleaner fuel.
So now, China is starting to build up their “emergency reserves” of natural gas.
In their latest “5-Year Plan,” Chinese authorities have made it a top priority to build these reserves. They want to safeguard themselves against possible abrupt shortages caused by natural disasters and unrest overseas, etc.
It will ensure what they call “national energy security.”
This means that not only is China using more natural gas. But the Chinese are now stockpiling natural gas reserves for future use. That’s huge for natural gas prices!
Both of these dynamics are going to help propel natural gas prices even higher over the upcoming couple of years. In fact, if you look at the chart below, you will see that the turnaround in natural gas could very well be beginning now.
Natural Gas Forms a Bottom over the Past 1 ½ Years!
The Last Way You Would Expect to
Play this Commodity
There are dozens of ways to play the rise in natural gas. But one of my favorites is actually in the currency market.
As I told my Currency Capitalist readers last month, one of the biggest beneficiaries of the natural gas rally will be the Canadian dollar.
Canada is the third largest producer of natural gas in the world. As China starts to stockpile natural gas in the coming years, Canada’s profits will soar. Beyond that, the Canadian dollar will also get a nice boost.
China is changing the world in more ways than one. One of the next things they are going to change is the price of natural gas. Get ready for a run-up over the coming months to years!
Have a Nice Day,
Editor, Currency Cross Trader