So what's the big deal with natural gas?

So what’s so good about low gas prices?

The most recent prices I have for natural gas are under $2.00 and the spot price for NG, bought without a long-term contract traded at $1.87.  By the time you read this, it could be even lower!  So I ask the question, is this good or is it bad?  But before I answer it, let me take you on a little journey into this world with some facts and figures.

Prices and Costs

·         Current U.S. futures price: $1.98/1,000 cu. Ft.

·         All-time low: $1.32 (Jan. 1995)

·         All-time high: $15.38 (Dec. 2005)

·         10-year average: $5.96

·         Current price in Asia: $15.90

·         Current price in Europe: $9.37

Producers

·         Top Producers of NG in U.S.: ExxonMobil, Chesapeake Energy, Anadarko Petroleum, Devon Energy, Encana.

·         Top five producing states: Texas, Alaska, Louisiana, Wyoming, and Oklahoma (yeah for the home team).

·         Top five producing countries: U.S. Russia, Iran, Algeria, Canada

How Natural gas is used in the U.S.

·         34% is used for generating electricity

·         30% is used by industry to heat boilers or make chemicals, fertilizers, etc.

·         21% is used to heat homes, cook, dry clothes and heat water

·         14% is used to heat buildings, restaurants and shops

·         0.1% is used to power trucks, cars, buses and other vehicles.

How it might be used to benefit from US growing supply

·         Expand the production of plastics, fertilizers, etc., that use NG as a feedstock

·         Liquefy it for export to Asia and Europe where prices are far higher

·         Build more NG fueling stations

·         Turn it into diesel or ethanol.

Sources: Oil Price Information Service, Platts, Energy Information Administration, Natural Gas Supply Administration, World Publishing Company

So back to the question.  Is this good news or bad?

For many in our industry, it is simply awful.  At E-Tech we sell energy recovery.  Just a few years ago when natural gas soared to $15.38, paybacks on our equipment were measured in mere months.  Installed!  But those halcyon days have passed.  In a return on investment calculation, the energy effect is linear so that if NG is priced at $2.00, it takes seven to eight times as long for an investment to pay for itself as it does at $12.00.  So it’s bad, right? Ouch and yikes!

No, it’s good tidings.  Just ask those in the ethanol business.  Their issue of course is that the primary source of stock is corn.  With corn prices sitting above $6.00 bushel, this is becoming an expensive business, correct?  Well, not exactly.  Low NG prices allow those producing ethanol to continue moving forward profitably which is good, right? Ooh and aah!

Well no, it’s bad news.  Check out the natural gas producers who have based their exploration on predicted NG pricing that not so long ago was several times higher than it is today.  There’s so much gas being produced that we are running out of places to store it thereby exacerbating the price issue further.  This is bad, right?

Not really, it’s good.  Just look at places like Japan that pay about $16 for LNG (liquefied natural gas) and other countries paying similarly high prices.  Exporters in the US are looking at shipping LNG at high margins, something we all love.  Consider also Compressed Natural Gas (CNG) that is becoming more and more available in our country at a price of about $1.15 per gge (gasoline gallon equivalent).  This will likely lead to higher natural gas prices. Which is good, right?

Well I could go on and on here.  The point I’m really making is that we are most fortunate in this country to have resources such as this that offer wonderful opportunities including reduced dependence on unstable energy sources around the world while at the same time lowering harmful emissions.

To end, I could say “the grass is always greener…” but, this is better.

“Start where you are. Distant fields always look greener, but opportunity lies right where you are. Take advantage of every opportunity of service.” ~ Robert Collier, American Motivational Speaker (1885-1950).

PS – Once again I beg your indulgence.  Because of upcoming travel schedules, the next edition of this blog will be posted in mid-May.

The Last Word on Boiler MACT?

The never-ending saga of the Boiler MACT issue may finally be coming to an end – or, if you prefer, a new beginning.  Last week the Senate voted on amendments (30 of them!) to the Highway Bill (S. 1813).  The 30 amendments had been reduced from a higher number based on the leaders of both parties agreeing to limit eliminate those issues that had nothing to do with transportation.  Imagine that!

By a vote of 52-46 – with 60 votes needed for passage – the EPA Regulatory Relief Act (AKA the Collins Amendment to the Highway Bill of 2012) was defeated in the US Senate.  With this defeat, the current EPA rulemaking on the ICI-BMACT will finally be issued this spring.

As any of you who have read this blog know, E-Tech, as a part of the ABMA, worked against the EPA Regulatory Relief Act in its varied incarnations be it as a stand-alone bill (HR 2250 & S-1392), an amendment to the Payroll Tax Holiday and now again with the Highway Bill.

However, the reality of this moment is the issue may yet appear again in another guise prior to the finalization of the rules by the USEPA at some time in the future.  All that would yield is to step back a year or so in order to lead back to the exact point where we are today.  That this is a waste of time for everyone involved is an obvious conclusion but that is not soon to stop Congress.

Keep in touch for further developments.

To end, here are two thoughts on politics.

"The Liberals are the flying saucers of politics. No one can make head nor tail of them and they never are seen twice in the same place." ~ John G. Diefenbaker, Canadian Prime Minister (1895 - 1979)

"Conservatives are not necessarily stupid, but most stupid people are conservatives." ~ John Stuart Mill, English Philosopher (1806 - 1873)

PS – Because of upcoming travel schedules, the next edition of this blog will be posted in mid-April.

Can we all agree that politics stink?

I stated in my original statement that I was not going to be political in this blog.  Yet here it is, the end of February, and I am already sick of the electioneering.  So, if I am able to parse my original language, rather than be political, I’m going to discuss politics.  In several of my recent blogs, I have discussed the vagaries of MACT and the support the American Boiler Manufacturers Association (ABMA) gives to the passage of this EPA legislation.  Just to clarify one point, the ABMA, as a group, is ideologically right of center.  I know this anecdotally having attended conferences over the years and listened to many political conversations.  The majority, I am positive, vote Republican.

So why is it that this right-leaning group stands so strongly behind their positions regarding passage of the MACT?  It is because their beliefs transcend political ideology to realize that not only are the ideas espoused in MACT are good ones but they are also eminently achievable with technology readily available and at a cost that is worth the price.  Yet, this bill has been mired recently in two different attempts to tamp it down: the first was when it was attached to the extension of the payroll tax deduction extension; the second is right now, when it has become part of the transportation bill.  I, along with several members of the ABMA individually as well as the organization as an entity, wrote letters to our Senators and Representatives urging them to back this legislation.  In my state of Oklahoma, I know this effort is in vain.  One of the US Senators, James M. Inhofe, has just published a book called “The Greatest Hoax” that states that global warming is a conspiracy that threatens our future.  Now I will not to pretend to be a scientist and my own personal beliefs on this issue don’t matter but I’m hardly going to subscribe to a Senator’s viewpoint who calls global warming (or climate change as some prefer) a hoax despite a great deal of evidence to the contrary.

Wow, did that feel good to say!  Our country sits here, eight months from a general election, and there is already a poisoned atmosphere.  And this is just on the Republican side of the page.  Obama, although clearly mentioned, is not yet the favored target; it’s other Republicans.  So when they finally choose their candidate, Romney or Santorum, I assume, we’ll then get ready for the main event.  I for one am quite sick of politics and eagerly await the end of this process in November.  Perhaps, depending upon the results of the election, they might actually sit down as elected officials and find some middle point to correct the ills of our country.

To finish, here’s a little blurb on politics.

“Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule - and both commonly succeed, and are right.”  ~H.L. Mencken, (1880-1956)

How much fuel can I save?

One of the first questions I am asked about heat recovery is whether or not the payback will warrant the installed cost of an economizer.  I'd like to say the answer is always an unqualified "yes", but things are never quite so simple.  Conditions such as hours of operation, average firing rates, government subsidies and utility cost-sharing all have an impact.  And then there's the cost of fuel.  While low energy costs - particularly those of natural gas - are a tremendous boost to our greater economy, they deflate the ROI of heat recovery products.  Even though natural gas prices are already depressed, the current trend line suggests they're going to be even lower in 2012. 

Yet despite all of the "bad" news, there is a relatively simple way to figure out how much fuel will be saved by adding certain types of heat recovery equipment.  With a boiler economizer, fuel savings range from 3-8%.  So by determining fuel costs for a boiler, you easily can calculate fuel savings.  The hotter the flue gas temperature, the higher the fuel savings is typically a good rule of thumb.

Finally, my thought for the day has to do with conserving energy.:

"We waste our lights in vain, like lamps by day" - William Shakespeare

Boiler MACT and other oddities

Finally, the holidays are over and the shows and meetings that for me occupy a good deal of time during December and January are done.  Now I can get back to a normal regimen for my blog.  In reviewing my earlier blog from January I went out on a very thin limb by making various predictions for 2012.  Under the “Sports” section, I guessed LSU over Alabama and Green Bay to win it all.  As all of you know from reading my blogs, these were obviously typos. 

I just returned from the annual ABMA meeting in Palm Springs, California.  For those of you living in a cold climate, I will not tell you how wonderful the weather was out there; stay away in the summer though!  At the conference was an economist who forecast a decent 2012 and 2013 so plan accordingly.  After a few sidesteps in 2014, we can expect growth during the period 2015-2017 with some slowing in 2018 and another steep recession in 2019.  I’ll leave each of you to mull over the merits of these ideas and plan accordingly.  I will say that the economist has a good record on these matters.

As I have discussed in previous newsletters and blogs, the U.S. Environmental Protection Agency’s March 2011 ICI-BMACT rules continue to evolve and gel.  In the end of December these rules were published in the Federal Register.  Sorting out all the meandering paths taken by this legislation, the obstructions in Congress along with court challenges and rulings takes someone much more attuned to these nuanced efforts than a simple, non-political guy like me.  Suffice it to say that it appears things are moving forward.  There are two measures going through our dysfunctional government:  HR 2250 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr2250rh/pdf/BILLS-112hr2250rh.pdf),  a house bill designed to allow more time for review of the EPA proposal (it’s been going on for 10 years now so the extra time being requested fails the smell test here);

and S1392 (http://eenews.net/bills/111/Senate/180811105617.pdf, the Senate equivalent of the same odious bill. 

 The ABMA position on this is clear and forceful: it strongly opposes both of these bills and urges all the stakeholders in the process to get moving on getting the final rules codified and the relevant EPA rules moving forward. 

More on this as it develops.

Finally, after my “brilliance” in showing my prognosticating skills, here’s my quote for the day.

“Prediction is very difficult, especially if it's about the future.” ~Niels Bohr, Danish Physicist, 1885-1962.

Happy 2012

Happy New Year

Oh my.  Just look at the calendar!  I blinked and it is 2012.  When I was a boy of around 10, I remember thinking that when the millennium changed from 1999 to 2000 that I would be 53 years old.  Naturally, that seemed rather ancient to me at the time but I look back to 2000 fondly as I was “only” 53.  Alas.

With that bit of nostalgia out of the way, let me start my first blog by wishing everyone, including the Mayans who predict a 2012 catastrophe, Happy New Year!

Predictions for 2012

As with most companies, E-Tech must submit forecasts to its owners as to the business climate we expect to see for 2012.  A decade or two this was a simpler task as the world was a less complicated place.  Even though we are a small company, E-Tech has to look at the macro side of the world as the interrelationships of our little planet are so powerful in what we do.  So here is what I think is going to happen this year.  Note that these predictions are based on reasoning, not necessarily what I hope will occur.

1.       The Economy – This one’s easy as most analysis I have seen point to a continued improvement in the US economy in general and to other parts of the world in particular.  Are there blips out there?  Sure.  China will have to come to grips with many issues that endanger it including its banking system.  A consensus for US growth seems to be around 2.5%.

2.       Unemployment – Public sector losses will dampen employment so that by the time elections come around in November, the rate will not be much different than it is now.

3.       And speaking of the election… I predict Obama will be re-elected in a run against Mitt Romney.  Do not be surprised to see the president have a different VP.  In a move more toward a dysfunctional government, the GOP will capture the Senate thereby assuring that Congressional approval ratings remain in single digits.

4.       On a microeconomic level, specifically my own business, I predict 2012 to be a reasonable year though not as robust as 2011 was.  Most of E-Tech’s representatives share this view as well as customers who replied to our requests for their opinions.

5.       Inflation – Not too much of a factor.  For our own business, steel prices, at least for the time being, are stable or lower.  Natural gas prices by the end of the year figure to be $3.50 or so.  Take note, however, that the US is beginning to export large amounts of natural gas; though this is not probably going to have too much impact in 2012, we could see an upward blip in 2013 or 2014.  E-Tech is seeing increased pricing pressures due to scarce fabrication resources in the Tulsa area.  This could cause fabricated costs to rise with or without material price increases.

6.       The stock market – Oh boy, here we go!  I believe that long-term, the market is bearish as there are so many issues – debt, growth, political stagnation in the US, lack of a coordinated plan for adapting to a global market, education problems – that must (my word) be addressed at a macro level and won’t be.  With that caveat, I think 2012 and 2013 will be decent years with gains of 5% or so each year.  Beyond that, buyer beware!

7.       Sports – LSU over Alabama (I would have preferred to see Oklahoma State lose to one of these two but the BCS saw to that not happening).  And in the Super Bowl?  My money’s on Green Bay.

Finally, these are my own opinions and as anyone who knows me will say, I’m wrong far more often than right.  And to that end, you may all, at the end of the year, remind me of this fact – unless, of course, the Mayans were right after all.

For my first blog of 2012, it’s appropriate to have a New Year’s quote.

The proper behavior all through the holiday season is to be drunk.  This drunkenness culminates on New Year's Eve, when you get so drunk you kiss the person you're married to.  ~P.J. O'Rourke (born 1947)

Merry Christmas to all

As this month is already nearly gone - and the first half spent traveling - I wish to say only to all of you, your associates and families, the very best of a wonderful holiday.  When the new year starts, I have plenty to tell you but that will be my first New Year's Resolution.  And since I fall flat on these promises every year, I intend to keep this one so stay tuned.