No matter who wins, natural gas will probably lose

The industry looks set to remain stuck in its first inning for some time to come.

By Jim Cramer Nov 6, 2012 9:52AM

TheStreet.com logoKevin Burke, CorbisYes, Jack Welch was right Monday when he said on CNBC's "Squawk Box" that we are in inning one of the natural gas revolution. But this is a game that could easily be rained out simply because the groundswell to use the stuff may end with the forces that are peddling it.

 

We periodically hear about companies that are switching to natural gas engines. But they tend to be companies that are in the industry themselves or are inner-city operators who are afraid of governmental authorities and don't want to run afoul of rules on airborne particulates.

 

Some trucking companies are embracing it. Clean Energy Fuels (CLNE) put out a very good paper last week about early truck adoption. But, again, this is a first-inning matter. It's not a shift that's at critical mass, which is what must happen for a change in this industry to matter. Selling millions of gallons doesn't cut it. It has to be billions of barrels.

 

Yes, what Jack Welch has wrong is that the nat gas revolution is totally stalled out right now. We've learned as much from Sam Thomas, the CEO of Chart Industries (GTLS) -- the ticker symbol denotes "gas to liquids" -- and Dave Demurs, the CEO of Westport Innovations (WPRT). Chart makes the equipment needed to turn nat gas into the compressed gas that can be used in surface vehicles. Westport ought to know, as it makes the engines that run on it. Thomas is now predicting it might take 10 years before any meaningful shift occurs. Is this a 10-inning ballgame?

As I articulated Monday night, if Mitt Romney wins the presidency, he will have to help make nat gas a primary surface fuel in order to make North American energy self-sufficient. Nat gas will have to replace diesel for trucks, because trucks use one-quarter of the oil imported into the U.S. Romney has said over and over that he doesn't want the government picking winners in private enterprise, but that would directly clash with his self-sufficiency goal, and I don't know which one would win under him. But I do know he would never accomplish that latter, chief tenet without throwing his presidential weight behind this fuel.

 

But if President Barack Obama wins, forget it. The market will not sustain it and trucks will stay with diesel. They just wouldn't have the incentive to switch, and they don't have the gas station network built out. It's just too risky, and it could be a huge mistake for trucks if there is no build-out.

 

Now, get this. If you think I am asking for too much to think the government could ever get involved to push this initiative along, just consider that we in the U.S. burn a huge amount of our corn crop, our basic food staple, in order to make an inferior form of gasoline that uses up a gigantic amount of water that no one really wants -- and the government subsidizes it.

 

That's totally nuts. It's ridiculous.

 

But ethanol got through because of the power of the farmers.

 

Unless the nat gas industry begins exhibiting farmer-like power, I can promise you the U.S. will be in inning one for the next four years if Obama wins -- and this will probably hold true in the unlikely event that Romney wins. In Romney's case, again, this would simply be because he doesn't want the government to get behind any private enterprise.

 

So we wait for inning two.

 

Don't hold your breath.

 

Jim Cramer's face

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and had no positions in stocks mentioned.

 

 


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12Comments
Nov 6, 2012 1:24PM
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With diesel at over $4 a gallon and LNG 50% less than that trucking companies don't need gov. incentives. Walmart is converting all their trucks over to LNG right NOW. Without gov. subsidies. In 3 years all will be running on LNG.


Nov 6, 2012 1:41PM
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now who ever wins natural gas will lose?? (not what he said a few months ago?)

Nov 6, 2012 3:43PM
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cramer is an excellent source of natural gas ....
Nov 6, 2012 12:23PM
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 They SHOULD be stimulating the economy by actually getting us off oil and onto natural gas. They SHOULD be running natural gas lines to reach at least 98% of the homes in the lower 48. MILLIONS of jobs would be created as we convert and expand and the frosting on the cake is energy independence. It's as clear a win win situation as it can possibly get

 The only possible fly in the ointment is that  Big Oil wants to completely deplete their oil reserves first, milking their cash cow to the very end and will buy as many Senators as necessary to ensure it
Nov 6, 2012 3:03PM
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My Cadillac has a natural gas kit so it will burn either regular gas or compressed natural gas at the push of a button. Compressed natural gas is found at most city airports. We happen to live near one so we fuel up with natural gas for running around the city for the week. It is clean burning, does not require a stinky refinery, and keeps the air and engine clean! Don't have to change engine oil as often. It is a major advantage and CNG is plentiful in the U.S.

     Mitt Romney is the candidate that will organize and develop more CNG filling stations especially at truck stops. I am voting Mitt Romney and Republican straight ticket because independence from foreign oil is part of the Republican way to increase jobs and develop our economy to its full potential rather than propping it up with quantitative easing.

Nov 6, 2012 12:08PM
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Yes the gridlock status quo will continue, but it's who is in charge as the economy inevitable improves that will have a great case for 2016 by saying whatever they did worked
Nov 6, 2012 7:00PM
Nov 6, 2012 12:13PM
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IF the economy returned to normal or even heated up, would not deficit projections become moot?
 The gloom and doomers are assuming tax revenues will be stunted forever. NOTHING is forever  not even housing bubbles, huh.
Nov 6, 2012 5:37PM
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Get ready for tomorrow's Market Crash ! Smart Money has left the House !   TAKE YOUR MONEY AND RUN !

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I think Cramer may have  good reasons for his view.  Because of gross ingnorance about two

subjects: man made global warming from carbon dioxide and the amount of carbon dioxide that

is given off by natural gas when it is burned.

 

The current global warming effort is consensus science  which is not real science.  About six months ago I tried to get estimates of the amount of carbon dioxide that is given off when natural

gas is burned; what I found was 25%, 50% and 75% of the amount that would be given off by

burning gasoline.  Also I heard Bill Gates say  (on either the TV or internet  as part of the summary from a group of CEOs)  that he is supporting research on a new, safe nuclear electric generator because commercial nuclear power has caused less fatalities than any other comparable source.

 

So I think there may be good reasons to say "slow down" to the natural gas horses.

 

William B. Smith

 

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