Momentous Change in US Natural Gas with Global Impact as Exports Soar to Huge Record Despite Collapse in the Spring

Biggest buyers: Mexico, South Korea, Japan, China, Spain, UK. Price spike in February, when Texas froze up, unwound. Asian LNG price spike in January is unwinding.

By Wolf Richter for WOLF STREET.

The natural gas fracking boom that over the past 12 years devastated investors, drove some of the biggest producers and fracking pioneers, such as Chesapeake Energy, into bankruptcy, and caused much publicized environmental damage, has turned the US from a large importer of natural gas into the world’s largest producer of natural gas. In 2017, the US became a net-exporter of natural gas – with exports exceeding imports.

Exports via pipeline turned Mexico into the largest buyer of US natural gas. In 2016, exports of liquefied natural gas (LNG) by ship took off, particularly to South Korea, Japan, and China, but also Spain and the UK. From March through July 2020, LNG exports collapsed by 60%, but then bounced back and blew past the prior record. According to the EIA’s new data for the end of the year, LNG exports in December jumped to 304 billion cubic feet:

For the whole year 2020, LNG exports closed out with a new record of 2.4 trillion cubic feet, up 31% from the prior year, despite the collapse in the middle.

Exports via pipeline ticked up 1.9% in 2020, to a new record of 2.9 trillion cubic feet, of which 69% (1.9 trillion cubic feet) was pumped to Mexico. And 31% was pumped to Canada. But note, the US imports larger quantities from Canada (more in a moment).

Total natural gas exports in 2020, by pipeline and LNG, rose 13.4% to a new record of 5.3 trillion cubic feet:

Imports.

Natural gas imports in 2020 dropped 7% to 2.6 trillion cubic feet, the lowest since 1993. Of these imports, 98% came via pipeline from Canada. The US and Canada have a vibrant bilateral trade in natural gas, each serving regions in the other country that are not well connected by pipelines to its own producing regions.

Small amounts were also imported via LNG during peak winter months by areas in the US that are not yet well connected via pipeline to the new producing regions in the US, despite major efforts to build out the infrastructure over the past decade. Boston is one of them.

Natural gas imports had peaked in 2007, just before the fracking boom commenced, at 4.6 trillion cubic feet. Since then, they have plunged by 43%.

Net exports: Exports minus Imports.

Given the continued surge in exports, and the continued drop in imports, “net exports” of natural gas – exports minus imports – soared by 46% in 2020 to a new record of 2.7 trillion cubic feet:

LNG exports to biggest customers.

Exports via LNG, following the construction of LNG export terminals in recent years, has soared, starting in 2016. In 2020, South Korea became the largest buyer of US LNG, at 316 billion cubic feet; Japan was in 2nd place (288 billion cubic feet), followed by China (214 billion cubic feet), Spain (200 billion cubic feet), and the UK (160 billion cubic feet).

China (green line) just about stopped importing US LNG in 2019 at the boiling point of the US-China trade war. But then in 2020, it pulled out its checkbook:

The price of natural gas in the US.

The fracking boom – among its other accomplishments – collapsed the price of US natural gas. At the moment, natural gas sells for $2.49 per million Btu (MMBtu) at the Henry Hub, the official delivery location for futures contracts on the NYMEX. In the years before the fracking boom, the price was mostly above $4 with horrendous spikes into the double digits.

But in mid-February, there was an extraordinary spike when Texas production sites froze up. On February 17, natural gas closed at $24/MMBtu. The weekly chart below, with data from the EIA, shows the price for that week at the close on February 19 at $12.18. The pricing chaos only lasted a few days, and then prices reverted to the recent normal range, including $2.49 today:

The price of LNG in Asia.

LNG prices at their destination in Asia began to surge last fall. Japan’s Ministry of Economy, Trade and Industry (METI) publishes average monthly prices of LNG at the time of arrival in Japan. In January, they hit $15.5/MMBtu on average and in February $16.3/MMBtu, having more than tripled from a year earlier:

S&P Global Platts JKM reported that on January 12, the LNG benchmark for Asian spot LNG hit $32.49/MMBtu, the highest in the data, amid harsh winter weather in Asia that impacted shipping and LNG facilities, fired up demand, and created bottlenecks.

Those issues have settled down, supply from the US and other countries is ramping up, and Japan’s METI reported that average prices at the time of contract – they precede arrival prices – plunged 31% month-over-month in February (to $12.7/MMBtu) from January ($18.5/MMBtu). And arrival prices follow with a lag.

For LNG exporters everywhere, including in the US, the rich prices obtained in energy-starved Korea and Japan particularly, and to a lesser extent in China, are a big lure, and as production is ramping up again, the price spikes seen in Japan and elsewhere in Asia have already started to unwind.

US electricity generation from coal collapsed to record low in 2020, natural gas dominated, and wind and solar surged. Read… Electricity Sales to End Users Dropped Below 2008 Level: What it Says about the Pandemic Economy, Households, Commercial & Industrial Activity, and Public Transportation

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  86 comments for “Momentous Change in US Natural Gas with Global Impact as Exports Soar to Huge Record Despite Collapse in the Spring

  1. shandy says:

    I’m listening to a Herman Hermits 45 rpm right now.
    It won’t stop skipping its wax grove so I keep sitting here hearing the same pulse, beat over and over again.
    It reminds me why a stay put on the market sidelines. If your still in this charade you are still chasing that elusive dollar.

    • BuySome says:

      Somethin’ tells me you’re into somethin’ good.

    • Drunk Gambler says:

      It’s a seasonal peak. Winter, especially cold one always push Natural Gas prices higher.
      But it can be indication of economical growth in Asia. They’ve handled pandemic better, reopened sooner.
      Also more energy has been generated by Natural Gas lately, wich also increased demand.
      I’m curious, after all those small fracking companies bankruptcies, who’s got their assets and wells? Half price no doubt…

      • Gandalf says:

        I would check out how Sam Zell is doing – remember in 2019 he was doing those Drillco deals with the distressed fracking companies, most of them in natural gas.

        The Grave Dancer is probably scoring another huge hit.

        Zell’s Drillco deals were expressly designed to screw the earlier investors of those fracking companies.

        Wolf, check out my posts about Zell from that time period.

      • Thomas Roberts says:

        Drunk Gambler,

        The cold winter is a factor, however, i don’t think any substantial country right now has real economic growth (except Vietnam). All that junk Americans and Europeans bought because of stimulus and as a substitute for services is probably in the demand for Asia. Large parts of asia are handling the pandemic better for various reasons, that wouldn’t cause an increase though, it would prevent a decrease. It’s possible alot of Asians, because of pandemic also shifted their spending, however, I haven’t heard much about it.

        As far as the bankrupt wells, the general word is alot of those toxic assets are being shoved into pensions. The 10% and corporations probably own the good fracking assets or at least while that particular asset is worth owning.

  2. cd says:

    NG, the widow maker, daily chart is near oversold and 200 lies below, NG has a good chance to make a run north on any extra winter….scaling in at 28-32 200 bounce….been a long time since long term chart looked so good…..widow maker is not for early entries….

    which this year looks good….

  3. Seneca’s Cliff says:

    My sister retired to a house near Cabo in Mexico. The only water she has is delivered by a truck from the desalination plant because the groundwater there is rapidly being depleated. I told her she better hope that Mexico keeps enough of a positive balance of trade to afford the huge quantities of natural gas they need to run the De Sal plants or she will be out of luck.

    • GotCollateral says:

      Or start investing in CSP desal…

    • Old school says:

      It’s a different culture. My friend is from central american and his wife from Mexico. They have very traditional marriage where he works his butt off and she stays home and raises the kids. Everyone else in the neighborhood is doing it the American way with two people working or are divorced living alone. One person’s sexist is another person’s culture.

    • roddy6667 says:

      Brazil may be bad, but they are better than the US. America has almost twice as many sick people per million and 20% more deaths per million.

      Cat>kettle.black.

    • Thomas Roberts says:

      Seneca’s Cliff,

      Long term, the only way to ensure cheap plentiful water for many countries is either nuclear or fusion. However, large nuclear plants would sometimes end in disaster or be under construction for far too long. So, the fabled safe and cheap mini nuclear reactor would be required.

      It is of course possible to conserve water, recycle water and not put large cities in certain deserts, but, i doubt that will stop.

      Mexico will probably eventually get some more of Asia’s manufacturing, so as long as they keep the cartel under control (at least not let it get worse) and don’t go full Vennezuela, I would expect Mexico to improve. Other countries in Asia I’m not so sure about.

  4. David Hall says:

    Pennsylvania is the #2 natural gas producing state. Texas is #1.

    Saudi Arabia started fracking its shale for natural gas as they need gas driven electricity.

    Mexico has untapped natural gas in their shale.

    There is a ban on drilling for oil and gas on Federal lands that may cause some losses to companies already laden with debt from the pandemic drop in demand.

    • Paulo says:

      Kitimat (BC) LNG project continuing const despite this years pandemic. I know quite a few people who are working in Kitimat. Should be totally online and in production by 2025. Plus two other projects have started on BC west coast.

      BC has huge reserves of NG and has committed to export. Coal exports are obviously in decline and NG will one day be the substitute.

    • w says:

      Just read elsewhere that the Marcellus Basin has surpassed the TexanPermian Basin for productivity.

      • Anthony A. says:

        The Permian Basin has been producing for 100+ years now. Marcellus is a newcomer!

        • Ensign_Nemo says:

          The first modern oil well was drilled in Titusville, Pennsylvania, by Edwin Drake in 1859, over 160 years ago. That was before the Civil War. We’ve been drilling holes in the ground to extract hydrocarbons for quite a while around here.

  5. Dale says:

    Meanwhile, Biden’s minions are busy trying to prevent the Germans into not getting any NG from Russian via the pipeline “that would be bad for them…”

    For a nice overview of this read Foreign Policy, the mouthpiece of the Fossil Fuel Statecraft Complex,

    “For years, the United States has tried to kill off Russia’s latest effort to strengthen its energy stranglehold on Europe. But targeted U.S. sanctions that go after the pipe-laying vessels needed to finish the 760-mile-long pipeline from Russia to Germany might finally do the trick,”

    Then read the excellent contrarian view via Pepe Escobar and “A Pipelineistan fable for our times”

    “It’s a running joke in Brussels that the EU never had and will never have a unified energy policy towards Russia. The EU came up with a gas directive to force the ownership of Nord Stream 2 to be separated from the gas flowing through the pipeline. German courts applied their own “nein.”
    Nord Stream 2 is a serious matter of national energy security for Germany. And that is enough to trump whatever Brussels may concoct.”

    • Dan Romig says:

      Couldn’t agree more Dale.

      • Dan Romig says:

        I have been reading Pepe Escobar’s reports for many years. One that came to mind, and bears mentioning now that I’ve read Wolf’s reply to Dale was written on August 26th, 2014.

        ‘Energy ballet-2: Syria, Ukraine & ‘Pipelineistan” spell out some of the behind-the-scenes competition for control over the supply of Nat gas to Europe.

        If one looks at where the Nat gas is: Qatar, Iran, Russia; where it is in demand: Europe; and what rout it would take to get from point A to Point B, one sees the cause to much of the strife in Syria and the Ukraine. Turkey is also part of this equation.

        While supply line proposals go back to 2001, the regime change in Ukraine took place in 2014, and the attempted regime change in Syria began in 2009. Ask yourself who was President and Vice President of the USA at these times.

    • Max Power says:

      To be fair… the strict sanctioning over Nord Stream II started in the previous administration. It’s not a Biden thing.

      • char says:

        Was more a senate thing and the democrats voted for it. So no, it was not Trump thing

    • Wolf Richter says:

      Dale,

      Concerning your first line: it’s Trump and Trump’s minions that started it.

    • The US LNG export program is meant to create geopolitical stability, just there is no statement to that effect. Russia is quickly approaching failed nation status. The got caught with their fingers in the American tech infrastructure cookie jar, and now face a bleak future. Pro Democracy movements in Belarus are spreading, Putin moved out of Moscow. Sanctions sanctions sanctions. Dick Cheney is smiling, even if he is persona non gratis in his own party.

      • Thomas Roberts says:

        How exactly is Russia reaching failed nations status? They survived their currency taking a beating and are focusing on self sufficiency. They also are shifting to avoid US dollars for international transactions so sanctions will be of decreasing effect. Also it is mainly only America doing sanctions, but Russia doesn’t buy that much from America. Focusing on self suffiency suppresses growth temporarily, but can pay off long term. The MC-21 (similar to a Boeing 737) is nearly done and will probably be among the best planes out there and could help launch other planes. Nordstream 2 is definitely gonna be finished and all their exports have limited competitors (even boeing buys aircraft parts from Russia). US “freedom gas” is much more expensive and is dependent on the shaky finances of fracking.

        Russia also has very little debt. Belarus doesn’t have much effect on Russia either way. Over time the value of manufacturing is going to fall because of automation and patents expiring and the like. The value of resources will go up, especially resources like trees, water, and food. Russia has the most resources out of any country. America’s tech monopoly will over time wane as the price of electronics plummets and as more countries can produce critical parts, as well as a probable shift to open source software and hardware. Nobody is going to replace America as the tech leader, most tech will simply become cheap and uninteresting, similar to what happened to TV’s.

        I’d bet on Russia long term, many times over before most Asian countries that everybody thinks are going to take over. Adding Russia to the “western world order” would shift the balance of power back to western domination. I hear people all the time, say Asia is going to take over the world, when only a few small countries are actually doing well. The future is in the Americas, Europe (Russia included) and a handful of other small countries like Taiwan, Japan, Australia and the like. I’ve also seen no evidence for most of the things Russia keeps getting accused of.

        • Implicit says:

          Great points!

        • Eugene says:

          Russia is more corrupt tgan any African country .Mafia rules.It will take 20 years at least for local bandits to die.Russian millenials are total loosers.

        • Gandalf says:

          TR,

          The near future prospects for Russia are driven entirely by the decisions of one Vladmir Putin, and the more distant future will depend on how long he rules and what his successors do.

          Putin is 100% going to want to stay in charge of Russia until the day he dies – he’s basically either murdered, imprisoned or otherwise co-opted or cowed all his opponents in Russia into submission.

          It’s anybody’s guess how long his health will last – he’s only 68 years old, and his health may allow him to rule for another 20 or more years.

          During that time, Russia will not be accepted into the circle of Western democratic nations. Putin has 100% put Russia back onto a path of confrontation with the Western nations – his #1 overriding goal has been this dream of regaining the lost glory of the Empire of the Soviet Union, and that can only be regained at the expense of the political and military influence of the United States and the freedom of the Eastern European and Central Asian nations closest to Russia.

          Anybody who sends agents to assassinate his opponents living in another Western nation has basically re-entered into the worst of the bad old days of the Cold War. And that’s where we are now, engaged in a Second Cold War with Russia. The demented spin of the former President of the United States about Putin being a great guy and not a threat to the United States – well, I’m sure some Americans still believe that, but I don’t and I thought from the beginning that was just outright treason.

          So, I totally disagree with you on this one.

          Yes, Russia has a vast amount of natural resources. So too do many other countries – Nigeria, with it oil fields, DR Congo with it mineral reserves, Venezuela, etc., etc. Why haven’t these countries become vastly prosperous and elevated the lives of their citizens into the First World by now?

          Well, it’s simple – it’s far too easy for corrupt political leaders to just steal those natural resources for themselves and use that wealth to keep themselves and their supporters in power, and furthermore to waste all that vast wealth on useless grandiose dreams and schemes that accomplish nothing.

          And that’s what’s happened to Russia, and will most likely continue to happen, even after Putin is no longer the leader. The country just has far too much history of corrupt central leadership to ever get its act together to take advantage of that vast wealth of natural resources. On the contrary – that wealth of natural resources makes it all too tempting for that corrupt system to continue far into the future.

        • Thomas Roberts says:

          Eugene,

          You must have no idea how corrupt most African countries are.

        • Thomas Roberts says:

          Gandalf,

          The claims about Russian agents are only as good as their source. An anonymous government source as the MSM often says, literally means nothing. The stuff Russia is accused of is far smaller than what actual US “allies” actually do, such as Saudi Arabia and Pakistan. The claims of what Russia does to its own people are smaller than what America definitely does. Corruption is basically a scale for each country, you’ll have to make the case that corruption in Russia is worse than America or the UK.

          Other resource rich nations usually only have particular types of resources such as natural gas and oil OR rare earth minerals not a large variety. Russia is the only resource rich country who is successfully working towards self sufficiency, you can get Russian made cars (some are joint ventures, but all top 10 selling cars in Russia are made in Russia), appliances, furniture, planes, and more. The electronics there fall well short of international standards for now, but it’s in progress. Actual living standards there were improving under putin (this doesn’t necessarily means he gets any credit, but it means he isn’t something that inherently prevents real growth) until oil prices dropped, but it’s held together unlike other oil producing countries. In the meantime, they are pushing for more self sufficiency. All the claims about how bad Russia are, largely come from the standard of living being currently below the better western European countries, it still beats quite a few other European countries and actual standard of living for the average person in Russia beats all those “rising superpowers” in Asia. Because of the fall of the Soviiet union, and the aftermath, they started farther behind and were given far less support than other ex members in reaching parity with EU members.

          As far as the global domination game goes, America, France, the Uk, and many other western countries are playing that game. It’s far better for central Asia to fall under Russia’s domain than china’s. China is trying to chip away at the land of its neighbors piece by piece. America and the UK are the main countries in the western sphere against Russia, however, now that the UK has left the EU it won’t really matter what the UK thinks and the EU will decide for itself. America and Russia have very little trade so there is very little leverage there.

          Russia can go either way, just like any country (except the countries that are totally screwed like Bangladesh), they are far from being a failed state, it’s better to align with Russia and not do things like jeopardize the US dollar and instead we can align the piece of sh*t countries we really don’t care about that we call allies with them, as opposed to each side having conflicting piece of sh*t countries they don’t really care about that are called allies.

        • Gandalf says:

          TR,

          Wow, how times have changed. “Align with Russia” when I was younger meant you were a no-good Commie and a potential traitor to the United States. Ronnie Reagan, who I voted for, certainly believed that.

          So sad to see how the most recent former Occupant of 1600 Pennsylvania Avenue managed to convince so many of his supporters that Russians had more in common with them than with their Other fellow Americans.

          You sure seem to have drunk that Kool-Aid. Or maybe you are actually just a well VPN’ed and disguised Russian agent typing away from one of Putin’s Internet Disinformation farms.

          Yes, Saudi Arabia and all those other countries are bad actors too. But they don’t have nuclear warheads aimed at our American cities. And I still take that seriously into account, as Ronnie Reagan did, whenever I think about Russia.

        • Thomas Roberts says:

          Gandalf,

          Them Communiists they wus comin’ around
          They wus in the air
          They wus on the ground
          They wouldn’t gimme no peace . .

          Well, I wus lookin’ everywhere for them gol-darned Reds
          I got up in the mornin’ ’n’ looked under my bed
          Looked in the sink, behind the door
          Looked in the glove compartment of my car
          Couldn’t find ’em . . .

          I wus lookin’ high an’ low for them Reds everywhere
          I wus lookin’ in the sink an’ underneath the chair
          I looked way up my chimney hole
          I even looked deep down inside my toilet bowl
          They got away . . .

          Well, I investigated all the books in the library
          Ninety percent of ’em gotta be burned away
          I investigated all the people that I knowed
          Ninety-eight percent of them gotta go
          The other two percent are fellow Birchers . . . just like me

          Well, I fin’ly started thinkin’ straight
          When I run outa things to investigate
          Couldn’t imagine doin’ anything else
          So now I’m sittin’ home investigatin’ myself!
          Hope I don’t find out anything . . . hmm, great God!

        • char says:

          Gandalf,

          when you were you Russia was not a state, The USSR was and it was communistic. Totally different ideology which like the US wants to spread it around the World. Russia today is standard semi-capitalistic, the ideology of almost all state, and as such not a problem to be allies with. But the US has a problem with being partners, they expect poodles.
          Also the assumption that Putin needs to fear for his life if he steps down is something of a Western hope without any base. He is still popular, does an ok job, is not somebody that makes enemies lightly and only a few (former) oligarchs hate him. None of the big opposition parties would harm him.

      • Sierra7 says:

        AP:
        Totally absurd!

  6. GotCollateral says:

    And they need USD for all those imports, and will less outbound USD flows what do they do? They sell UST… TIC data confirmed today -40B in cash UST sold by foreigners in Jan, from -20B in Dec… now id you think of the rehypothicatioj multiplier in eurodollar markets on UST collateral being north of 60… that represents ~$2.4T in collateral liquidated in Jan…

    Just trying to raise cash to pay for their energy bills and etc with less and less cash flow from before…

  7. MarMar says:

    We have two main possibilities:

    1) the boom continues, production continues, greenhouse gases keep building up in the atmosphere, causing more and more problems for us (bigger storms, deeper droughts, larger floods, etc), eventually leading to greatly reduced agricultural yields, massive migration pressures, and huge economic damages

    2) we get a handle on greenhouse gases, in which case all of the natural gas infrastructure being built now based on 30-, 40-, and 50-year working lifetimes never pays off its capital costs

    • Old school says:

      You have to recall that the same Harvard and Yale graduates that lead us down the zero carbon route are from the same schools that opened up China because they would become a democracy through trade and developed 50 years of disastrous mid eastern policies. For the the most part they are masters of the universe where their poop don’t smell.

      • MarMar says:

        What a strange variant on the ad hominem

        • Old school says:

          Maybe you don’t get what I am saying. Government policy encouraged the rapid development of China which encouraged the biggest ramp in pollution ever. Look up pollution caused by concrete and how much China has poured in the last 20 years or number of coal power plants built. 15,000 mile supply lines take a lot of fuel.

      • Sm says:

        Exactly old school.
        China’s entry into WTO was the game-changer. cLimate change and zero carbon emissions are for the developed western countries. Not for the eastern communist countries.

        • MarMar says:

          Two important facts here. Number one, with the shift in manufacturing comes a shift in emissions. A good portion of China’s emissions corresponds to Western consumption, and ought to be put on the developed countries’ ledgers. Second, while China is burning a lot of coal and pouring a lot of concrete, it is also installing far more wind and solar than anybody else.

  8. Cas127 says:

    All things considered, if we are to be a backward neocolonial outpost of China (exchanging food/natural resources for manufactured products – ooo! Give us magic talk boxes!) it is probably better that we are shipping out NG rather than soybeans.

    The higher value should buy us more time for DC to wake up, the educational system to reform, and the MSM to be honest about what has been going on

    Bwaa! Ha ha ha ha Bwaa! Ha ha ha ha!
    Bwaa! Ha ha ha ha Bwaa! Ha ha ha ha!

    • Whatsthepoint says:

      Who was it that called Russia a gas station masquerading as a country? Hmmm…

      • Cas127 says:

        Russia is an excellent example.

        A huge part of government revenues comes from oil (defined by government as owned by government).

        This has the effect of making a large part of the population politically indifferent (compared to what tax funded gvt would do).

        The Russian people know “their” “gvt” is filled with bastards…but since those bastards aren’t continuously, directly imposing their bastardry on *them*…there is no uprising.

        For the US…just substitute “printed money” for “oil”.

        • Cas127 says:

          Another parallel in the US…

          By making sure (through “progressive” taxation) that the significant majority of tax revenues come from a *minority* of citizens, the G games/rigs democracy in its favor.

          So no matter how asinine the waste, or blatant the corruption, if 51% don’t bear the economic burden…then a sleazy G has a pretty good shot of getting the graft through.

          Because a “majority” of voters are rendered indifferent.

          If we were talking millionaires vs. Ten thousandaire’s…that might be one thing.

          But the entire trajectory of modern government has been to narrow the spread to something like hammering people making 90k to redistribute to those making 30k.

          In that case, something entirely different is going on.

          Note how “millionaires” used to be the top hatted embodiment of capitalist excess.

          Note now, how 70 yrs of this has, of economic necessity and decline, lowered the bullseye to 400k in Biden’s tax plans.

          Economic decline will ensure that DC’s definition of “taxable rich” can only move in one direction.

        • char says:

          You want a gvt filled with bastards that want your money. Dumb bastards will take all but than next year there is nothing left. Experienced bastards will only take part and they will make policy to make the cake bigger so they can get more next year. Bigger cake is good.
          In Dutch disease countries the cake is mostly oil (or gold etc) so it doesn’t pay to make the cake bigger so the people stay poor, see Equatorial Guinea as an example.
          High tax is good, Make the state “tax farmers” want to grow the economy

    • Gandalf says:

      China hasn’t won the race yet. Google “HSMC” ( Wuhan Hongxin Semiconductor Manufacturing Co.) and see how that high tech semiconductor venture turned out

      As corrupt and inept as our politicians may seem, China, with its ingrained central government bureaucracy and obligatory system of guanxi needed to get anything important done, is far worse. They just don’t allow much of it to become public knowledge.

      • roddy6667 says:

        Guanxi is more direct and more efficient. In America you hire lawyers and lobbyists and “experts” to sway the public officials.

        • Gandalf says:

          r6667,

          Well, continuing along that same line of sarcastic reply, my reposte to you would be that the moneys spent on lawyers and lobbyists in America at least count towards this vast “Service Industry” that is the vast bulk of the economy of the U.S., and therefore adds to the growth of the GDP of the United States.

          But, on a more serious and hard facts level, the key difference between China and the rest of the modern, democratic nations is that there are NO PRIVATE PROPERTY RIGHTS IN CHINA. All land and the right to use that land or the underlying mineral resources, belong to the state. You can at best only get a piece of paper from the government that allows you to rent that land for whatever it is you want to do with it.

          And here’s the key – the government can, at ANY TIME, take that land use right away from you in China for no other reason other than “in the best public interest”, whatever that is. That piece of paper basically gives zero protection to you for having poured your money into whatever it is you put on that land to develop it.

          So, there was that story of an American MacDonald’s restaurant in a major Chinese city that one day lost its land use rights (no reason given), and got shut down overnight and the land was taken away and given to somebody else for another purpose. With no compensation.

          The result is that the government officials that have the power to make these land use decisions have 100% power over anybody trying to do something with that land. With 100% power and no legal structure to protect you, the only way to prevent getting screwed by one of these officials is …..

          Guanxi to the MAX!!!

          Yes, there is an American version of Guanxi, and NO, there is absolutely no version in America of the absolute power of Communist Party officials in China to screw you over if you don’t pay them Guanxi to the MAX for land use rights. Property rights exist in America, period. They don’t in China.

        • char says:

          Gandalf,

          do you know the concept of imminent domain? In the US the state can also take your land away.
          And in most countries mineral rights are already owned by the state and not the land-owner.
          Also almost all new housing developments on former agricultural land in the Netherlands is on erfpacht-land, which is kind of like the same system as what the Chinese use. And the same is true of Hong Kong when it was still British. IIRC Morocco all the land is officially owned by the king and you are only a sub owner.

        • Gandalf says:

          char,

          ah, of course I am familiar with the concept of eminent domain. More than you, certainly.

          Yes, the state can take your property away, for say, a project deemed to be in the public interest such as a highway, or in some cases, a large development project. BUT, there is ALWAYS the requirement that if you owned the property fair and square, the state has to compensate you for the fair market value of your property. What that value is often gets litigated in the courts. And, the absolute justification for the “public interest” necessity of eminent domain claims on your property can also be litigated in the courts.

          Depending on the era of American history and the pro-property rights versus pro-development sentiments of the judges involved, as well as other applicable laws such as environmental protection laws, it is not at all a slam dunk that eminent domain will succeed.

          Property rights in America means that there is a due process that is available to demand compensation and to review the necesity of eminent domain for ALL PROPERTY OWNERS.

          Now in some regions and during some eras of heavily pro-development America, it was tough to fight off eminent domain, especially for the poorer underclasses without access to great lawyers. BUT there is still this due process available in America.

          There is no such due process AT ALL, PERIOD, in China. There is no such thing as Private Property Rights in China.

          And that, my friend, is a HUGE DIFFERENCE, and that is why Guanxi to the MAX is STILL the rule of the day over there.

          As for mineral rights, yes, they do vary by country. In China, as in other countries, like Nigeria and Mexico, the mineral rights belong to the state.

          In the United States, the mineral rights vary by the specifics of the Deed of the Property that was sold to the landowner from the previous landowner. The previous owner of the land can sell the land above ground while retaining all mineral rights below ground. That is the current situation of the house I am living in right now – I don’t own the mineral rights to whatever is underneath my property. But, when I lived in California, one of the houses I owned at the time was built over an oil field and I did own those mineral rights. Every month or so, I would get a royalty check for the oil that had been extracted from under that land – it was usually only a few dollars, but I would get this royalty check

    • Wolf Richter says:

      Cas127,

      The other day, you suggested that I write an article about the inner workings of a website like this — “inside of the baseball” you called it. I’m not going to write an article about it because only a few people would be interested in it, but I did reply at the time with some details on the “inside of the baseball.” Not sure if you saw it at the time. So if you’re interested, you can go back to it here:

      https://wolfstreet.com/2021/03/09/the-signs-are-everywhere-businesses-have-changed-permanently-as-a-result-of-the-pandemic/#comment-325156

      • Cas127 says:

        Thanks, I’ll read it now.

        • Cas127 says:

          Yep, I had missed it (sometimes my keyword searches are incomplete for earlier days’ posts…even though I myself will comment on earlier posts…my bad).

          Your tech stack (hardware and software) isn’t radically different from what I would have guessed – It is good that you are able to run a fairly high volume site with generally plain vanilla, lower cost tools.

          Which brings in the other end of the equation, the revenue side.

          Given your expertise, time commitment (those charts don’t create/wedge themselves into WordPress by themselves), and decently high profile, mean that you could make a lot more money doing something other than blogging daily.

          (Blogs tend to evolve into insatiable mistresses)

          And we all appreciate it.

          That is the blessing/curse of what has happened to ad CPMs over the years.

          Without the low barriers to entry for publishers these days (see plain vanilla stack) we wouldn’t have 800k+ sites/blogs pumping out an unprecedented level of info and insight.

          (I still get vaguely nauseated by memories of the 3 TV network oligopoly – and local newspaper monopolies. Un-obstreperous but therefore fatally insidious in terms of molding public opinion)

          But the downside of those 800k+ publishers is the gutting of CPM rates (likely off 90%+ from the oligopoly days).

          So unless you can “make it up in volume” (Facebook’s trillions of delivered pages) then blogs tend to become hobbies rather than the lucrative outlet that some (like yours) deserve to be.

          Perhaps someday (on the 117th iteration) micro-transactions might catch on (diluting enslavement to the vanishing CPM) or more of the internet will go SubStack.

    • Implicit says:

      Energy use is directly correlated to GDP, and Nat. Gas is the wildcard in this international poker game. It has excellent cost/value and it is the cleanest of the fossil fuels by a wide margin.
      By product of NG is CH4 (methane) that combines with 2O2 (oxygen) to produce 2H2Os(water) and 1 CO2 (carbon dioxide) . Plants love CO2 and water, and they give us O2 in return along with food, beauty, protection and solace.
      Help the environment, plant something this spring.

  9. Micheal Engel says:

    1) NATGAS formed a two years inverse H&S ( dbl heads) with a neckline
    tilting up, between Nov 2019 and Oct 2020.
    2) QQQ TR is Sept 2020 hi/ lo.
    3) It formed a tapper tilting up. between Nov 2 2020 and Feb 16 2021.
    4) QQQ gap lower to the ICE line, forming an inverse H&S.
    Options :
    5) Diamonds in the sky : QQQ might form a continuation diamond.
    6) To a lower high LPSY : to form a one year H&S to send the markets down.

    • Fat Chewer. says:

      Long time no see! The dot point philosopher returns. We missed you. By the time I reached

      2) QQQ TR is Sept 2020 hi/ lo.
      3) It formed a tapper tilting up. between Nov 2 2020 and Feb 16 2021.

      I knew it could only be you.

      Welcome back to the ship of lost souls.

    • roddy6667 says:

      All this chart stuff reminds me of a Tarot reading.

      • Lisa_Hooker says:

        I agree. I use tea leaves mostly, with pigeon entrails the first of the month. Had to kill a chicken last March as it was an emergency.

        • Fat Chewer. says:

          Yes, you can use a chicken in an emergency, but your results will be back to front and upside down.

    • Old school says:

      That’s some wild stuff right there. All I know in the long term is anyone buying the SP500 with a div yield of 1.4% with the Fed telling you they are shooting for inflation to run hot isn’t going to be hitting a home run over the next ten years.

  10. Ron says:

    Demand and supply out of whack price should be much higher manipulate it like money and bonds

  11. Michael Droy says:

    Hmm. So the US is becoming an exporter of mineral resources at the cost of its environment. Meanwhile Japan, China, Mexico, Korea choose to import rather than frack for themselves because they have massive exports of manufactured goods to the US already.

    Who is colonising whom?

    • jm says:

      Japan is mostly igneous rock. Volcanic ash, lava flows, granite intrusions. Almost no oil (some coal). Fracked gas comes from thick shale deposits. They have only a little.

      • Old school says:

        Japan is natural resource poor, sometimes this is a blessing as it forces you to find other ways to compete by focusing on efficiency. If all you have is oil it provides a lot of revenue when prices are high and your economy becomes very distorted like Russia or Saudi Arabia.

  12. Micheal Engel says:

    1) NDX weekly : there is an uptrend line coming from Mar 23 2020 low and Mar 1 2021 and Mar 8. This line will be tested.
    2) It might support NDX, or be breached.
    3) A tapper (a wedge), a triangle, a pennant might be bullish.
    4) TA experts hate tappers. According to them tappers are bearish, but ballerinas and primadonnas love them.
    5) The ballerinas and the primadonnas might keep the bubble on.

  13. roddy6667 says:

    Natural is soaring on the back of the fracking boom.The financing that supports the industry would make Bernie Madoff wince. How long before the entire house of cards collapses?

  14. SpencerG says:

    It seems weird to me that Mexico needs to buy our natural gas. They have plenty of petroleum of their own. Is that just a pass-through trade?

    • Wolf Richter says:

      Mexico has petroleum, and the US buys their petroleum.

      They don’t have enough natural gas. And the US has lots of it. So years ago, Mexico started building NG-fired power plants (instead of petroleum-fired power plants), and cross-border pipelines were built to supply cheap US NG. That makes a lot of financial sense.

      • SpencerG says:

        OK… I thought they may be simply piping it to a port to send on to Asia. I don’t think we have any such LNG terminals on our own West Coast.

      • Gandalf says:

        Wolf,

        The missing part of that story of course is that Pemex has been horribly mismanaged forever and Mexico’s proven oil resources and oil production have declined and are continuing to fall.

        For all the oil that Mexico does produce, they never invested in the oil refineries to produce enough gasoline for the country, and now they don’t have the money to do so.

        So, despite all that oil production, 60% of Mexico’s gasoline comes from the United States, as theyhave to send the oil across to the U.S. to get refined.

        And, it’s well known that Mexico has lots and lots of the same sort of natural gas and oil producing shale deposist found just across the border in Texas. Here’s what one reference I found said:

        “Mexico has technically recoverable shale resources estimated at 545 trillion cubic feet (Tcf) of natural gas, and 13.1 billion barrels of oil and condensate, stored in marine-deposited, source-rock shales distributed along the onshore Gulf of Mexico region”

        But, getting Pemex to recover drill for that shale gas and oil with the same fracking technology used widely in the US just isn’t happening for Mexico, due to the usual incompetence at Pemex.

        • char says:

          Have you any proof that Pemex has been horrible mismanaged? Mexico has a (obvious totally undeserved) reputation to be corrupt. Would have an other form of oil exploitation, like by the 7 sisters, have let to more money for Mexico? I personally doubt that. And it is true that they haven’t gone after shall gas but is that dumb or makes that financially sense. There are websites, i wont name names, that claim that shall is a money losing failure.

        • Wolf Richter says:

          char,

          “Have you any proof that Pemex has been horrible mismanaged?”

          Here is one tidbit: Pemex ex-CEO arrested in Spain on corruption charges.

          https://www.bloomberg.com/news/articles/2020-02-12/former-pemex-ceo-lozoya-arrested-in-spain-mexico-says

        • Gandalf says:

          char,

          Pemex mismanagement – wow, the history of that could fill entire volumes.

          The best way to understand Pemex is to realize that it is a nationalized company in Mexico and is thus is controlled not by competant executives managing the complexities of a vertically integrated oil company, but by Mexico’s politicians, who treat it as only a piggy bank which they can use to reward their political supporters and family members.

          The bad results thus include things like a vast bloated payroll, incompetent people in important positions who don’t know what they are doing, and theft and more theft of corporate assets everywhere.

          And so, Pemex doesn’t have enough money left to do the necessary things to keep its basic businesses alive and thriving. Refineries to produce gasoline are not built. Oil wells with declining production need to have more wells drilled but that is not done. More exploration needs to be done to map out smaller pockets of oil reserves to prevent the estimated remaining oil reserves from crashing downwards. Security and maintenance of basic infrastructure needs to be kept up.

          Instead, there is stuff going on like widespread theft of the gasoline being pumped through the pipelines in Mexico, leading to the gigantic leak and gasoline fire/explosion in the town of Tlahuelilpan in January 2019 that killed some 137 people.

          Just a taste of the incompetence that is Pemex. I’m sure somebody else has the time to do a much more thorough list.

  15. NG is considered the industrial energy, the vagaries of weather seldom result in more than a blip in the chart, if growth heats up then gas will benefit.

  16. Micheal Engel says:

    1) WFH investors will use the $1400 to buy an AAPL. WB and friends,
    the strong hands, have plenty for them. The whales will be happy to sell them, thanks Biden…
    2) IWM is crazy.
    3) After rising like a rocket, IWM formed a wedge (tapper).
    4) Since Nov 9 IWM is flying in a vertical channel.
    5) The size of the first stage is about equal to 3rd stage.
    6) IWM might move lower in direction of a support line coming from Mar 23 2020 low to Oct 26 and Nov 2 lows. // Might move side way.
    7) Two weekly bearish divergence. // Falling daily volume.
    8) Be careful, it might be major.

  17. Micheal Engel says:

    Comment moderation : because AAPL is protection from inflation.

  18. c1ue says:

    300 bcf per month = 8.5 bcm.
    Nord Stream 1 alone is a bit over 4.5 bcm per month. Russia overall exports over 160 bcm/year = 13.3 bcm/month.
    So 300 bcf is a lot but the question still remains how much the export volume (and low prices) stick given the ongoing failures in the oil fracking market.
    I read that 40% of fracked natural gas comes from oil fracking wells,
    That part of the fracking market is definitely seeing a downturn.

  19. Augusto says:

    Why doesn’t the world want all that Free Solar and Wind Power like us? Oh yeah, we don’t want it either….because its not free, it doesn’t work (I mean it works, produces enough power for a new high efficiency 40 watt bulb, but not much else), and we didn’t ask for it (our “betters” want it, and told us to get it, and also want us to pay for it). Seems like a lot of country’s don’t really believe in Global Warming ( I mean they believe when we give them Carbon credits or destroy our industries, but they really believe it when they have to pay for it). But China has lots of wind and solar you say….yes, because they can sell us fools more turbines and panels and they can fool their own people into to believing the party is trying to do something about local pollution.

    • roddy6667 says:

      Having been living in China for the last 7 years, I can say that the air has visibly improved every year since the government promised a cleanup. Everybody sees it. The government doesn’t need charts or posters to convince the people.

  20. Augusto says:

    Yes, I have heard that, Worker’s Paradise. No smog, no Hong Kong, no Uighurs, no covid deaths in what a year now…..just happy, smiling, prosperous, smog free China…..Praise be to the Glorious Leader, President Xe. And I’m not even a poster living in China…..

    • Fat Chewer. says:

      Get over it. Uighurs are Muslim and look we are doing to them. Ever heard of Fallujah? Get your righteous indignation out of here.

  21. Lisa_Hooker says:

    The more quickly you export the gas, the more quickly the balloon deflates. All a question of time.

  22. Anthony says:

    New York Times….July 19 1994

    BEGINNING about 1,100 years ago, what is now California baked in two droughts, the first lasting 220 years and the second 140 years. Each was much more intense than the mere six-year dry spells that afflict modern California from time to time, new studies of past climates show. The findings suggest, in fact, that relatively wet periods like the 20th century have been the exception rather than the rule in California for at least the last 3,500 years, and that mega-droughts are likely to recur.

    The evidence for the big droughts comes from an analysis of the trunks of trees that grew in the dry beds of lakes, swamps and rivers in and adjacent to the Sierra Nevada, but died when the droughts ended and the water levels rose. Immersion in water has preserved the trunks over the centuries.

    Dr. Scott Stine, a paleoclimatologist at California State University at Hayward, used radiocarbon dating techniques to determine the age of the trees’ outermost annual growth rings, thereby establishing the ends of drought periods. He then calculated the lengths of the preceding dry spells by counting the rings in each stump.

    This method identified droughts lasting from A.D. 892 to A.D. 1112 and from A.D. 1209 to A.D. 1350. Judging by how far the water levels dropped during these periods — as much as 50 feet in some cases — Dr. Stine concluded that the droughts were not only much longer, they were far more severe than either the drought of 1928 to 1934, California’s worst in modern times, or the more recent severe dry spell of 1987 to 1992.

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