natural gas bubble da

7/27/2019 Natural Gas Bubble DA

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1NCNatural gas bubble is being avoided now, which restores companies toprofitability. Increase in prices is key.Wallace 12 (Christopher, Former private equity fund manager, now full time private investor; 7/17/2012, Natural Gas:Movements Into Storage Suggest Glut Will Soon Disappear, Seeking Alpha,http://seekingalpha.com/article/725781-natural-

gas-movements-into-storage-suggest-glut-will-soon-disappear - BRW)How much of a glut is there? The glut was significant, about 60% above the 5 year average at the beginning of thisinjection season. Natural gas is stored (in underground structures) and there is a finite amount of gas that can be stored.

That amount of maximum storage capacity is estimated to be about 4,200 billion cubic feet.Gas in storage is very much a function of peak and trough usage. There are times of the year when consumption exceedsproduction and inventories of gas in storage decline, "withdrawal season". This runs from November through March. FromApril through October, production exceeds consumption and inventories build through what is called "injection season". Manywill be familiar with the following graph produced and updated by the EIA, showing the two seasons: As the graph depicts,

this year we began injection season with inventories 60% above the 5 year average(2,437 bcfthis year versus the 5 year average of 1,514 bcf). For the last 5 years, the average inventory build over the injection season has

been 2,146 bcf. A normal injection season would take inventories above storage capacity, aprospect that could have a devastating effect on gas prices.Just a few months ago, pundits were callingfor this to happen and for natural gas prices to approach zero. Injections are below normal this season, fortwo fundamental reasonsNatural gas inventories are building at a much slower rate this

season. The glut that was built caused natural gas prices to plummet from $14 to a low of $1.92 reached this April 19. Thereduction in prices was so steep that it has brought gas to a level that is below most fieldsall-in cost of production. When the economics are such that you are forced to sell below cost, production naturallycurtails. The natural gas rig count has fallen dramatically from a peak of over 1,600 to 522as at July13, as drilling new wells ceased to be profitable. The other factor at work here is the decline rate that allwells go through. Natural gas wells are most productive after they are initially drilled andthen decline thereafter over their natural lifetime. Horizontally drilled wells are unique in that their declinerate is very steep after the first year, falling by about 70%. The growth in horizontal wells has contributed to an increased

overall decline rate. The injection and storage numbers show the glut being removed So far this season, injections arewell behind the 5 year average. The glut, which began this injection season at 60% above the 5 year averageinventory level is now only 19% above the 5 year average inventory level. From week 12 to week 28 this year injections havetotaled 766 bcf, compared to the 5 year average for that period of 1,087 bcf, a reduction of 30%. If the trend continues at 30%

below the 5 year average, storage at the end of injection season (beginning November) should be at3,761 bcf, only 80 bcf above the 5 year average. The glut will effectively be removed. But thestory does not end here. The rate of injection relative to the 5 year average has been declining overthe course of the injection season. I track the current year 4 week rolling average which has been decliningsteadily relative to the 5 year 4 week rolling average. Most recently the current year 4 week average is 43% below the 5 year 4

week average. If the rate of injections continues at that rate, this forecasts a season endinventory of 3,627 bcf, which is slightly below the 5 year average. What is the implication of thisforecast? A removal of the supply glut should elevate the price of natural gas to its full cyclecost of production plus a reasonable profit. We are seeing basic economics at work. Markets are in the longterm pursuit of equilibrium. When supply and demand get out of balance, the price mechanism adjusts to restore equilibrium.Excessive supply brought prices down. Producers will exhibit rational behavior in the long run, and they will curtail

production at prices that are below cost. We should expect no significant deviation from this pattern oflower injections until equilibrium prices are achieved, meaning total costs plus reasonable profit. Different

companies operating in different fields have different cost structures so it is difficult to make a general statement aboutindustry-wide costs and therefore where prices will return to. However, from what I have read from a variety ofsources, I think that costs plus a reasonable profit forecasts $5 - $6 natural gas. It likelywon't be a steady rise to that point, but once the market accepts that the glut has beenremoved, prices should get there. The time frame for this to occur should be measured inmonths, not years.

Popping the bubble turns the aff and causes a supply crunchBusiness Insider 7/4(Looking Ahead to the Next Oil Price Spike and the Threat of War, 7/4/2012 Lexis BRW)
http://seekingalpha.com/article/725781-natural-gas-movements-into-storage-suggest-glut-will-soon-disappearhttp://seekingalpha.com/article/725781-natural-gas-movements-into-storage-suggest-glut-will-soon-disappearhttp://seekingalpha.com/article/725781-natural-gas-movements-into-storage-suggest-glut-will-soon-disappearhttp://seekingalpha.com/article/725781-natural-gas-movements-into-storage-suggest-glut-will-soon-disappearhttp://seekingalpha.com/article/725781-natural-gas-movements-into-storage-suggest-glut-will-soon-disappear


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The difficulty is that an analogous scenario has unfolded before, in the natural gas industry. Out of sync with other

commodities, the boom and bust in natural gas is giving us a glimpse of the future for unconventional oil. The extractiontechniques are the same ones that have generated tremendous hype, while simultaneouslysetting up a ponzi scheme in flipping land leases, creating the perception of supply glut,crashing the price of natural gas in North America to far below break-even, amplifyingfinancial risk for increasingly indebted producers, and threatening to put those same

producers out of business. This is the dynamic that is set to lead North America into anatural gas supply crunch over the next few years, as we discussed recently in Shale Gas Reality Begins toDawn.Those involved in unconventional oil would do well to take note.

An energy bubble collapse spills over to other sectors and collapses theeconomyRuppert, 10 -former Los Angeles Police Department narcotics investigator turned investigative journalist(Michael Ruppert: Beware the Green Investment Bubble, excerpt from Confronting Collapse: The Crisis of Energy andMoney in a Post Peak Oil World, 4/11 http://www.chelseagreen.com/content/michael-ruppert-beware-the-green-investment-bubble/-BRW)

It would be unwise to instantly forget what happened with the dot-com and housingbubbles.Both were illusions and well-orchestrated wealth transfers from the middle andlower classes to the wealthiest people in the country. The housing bubble was created and fannedwhite-hot by intentionally deregulating the mortgage industry, fraud and a host of crimes which sucked people into buyinghomes they could not afford and could never hope to pay for. A ton of money was created and it went to the people who

ran the schemes: the largest banks, mortgage lenders and political campaign donors.When that bubblecollapsed, the taxpayers were asked to bail out first Bear Stearns and then Fannie Mae and Freddie Mac at total coststhat will top $1 trillion dollarsbefore counting the October 2008 bailout of $800 billion and all those thatfollowed under many deliberately confusing names into the first quarter of 2009. As I write, the total value of variousU.S. government bailouts has topped $10 trillion. This doesnt count the U.S. banks that have failed and are going to failbefore banks are inevitably nationalized. Those are the same banks where green energy companies will be forced to lookfor financing. Personally, I think that the sooner the big banks fail, the sooner people can get to devising local currencies,which is what theyll need to survive anyway. It is imperative to start that process whilebridges are still standing and freshwater still runs. We need to start the transition to local currencies while there is still electricity and while fiber-optic cablesare maintained and relatively new; while airlines fly and cell phones operate. None of the above takes into account all thecash that homebuyers put into down payments initially. That money was lost too. Thats the same thing as the money thatgullible investors poured into the dot-com bubble. The ones at the bottom of the pyramid are always us, and it is always

our money that disappears first. The current monetary paradigm offers no other option. The above does not address theequity (energy) that was lost in each collapse. These are real costs. In the market crash of 2002 and 2003 (which Iaccurately predicted, saying it was only a precursor to todays events) hundreds of billions of dollars of shareholder equitywere destroyed by the fraud of major corporations. Those dollars represented a lot more energy than what circulates today.The Federal Reserve has doubled its capitalization in less than a year, having left it alone for the previous nine decades.The equity was destroyed, but the wealth was transferred. And equity is where wealth resides in the dying economicparadigm. There may be 40% less equity in the Dow Jones than there was in late 2007, but there is more equity that hasbeen hidden and disguised by those who hold it. But even wealth transfers have a law of entropy. This is not a case whereall those investments were converted 1:1 into some other form. The elites who thought they were immune are going downtoo, like dinosaurs who cannot grasp their impending extinction. Even the Oracle of Omaha, Warren Buffet, has

discovered himself mortal. As the networksblithely talked about shareholder equity that was lost at the beginning ofthe collapse, they almost never mentioned how many billions of dollars pension funds, otherinstitutional investors and individuals put back in to the markets when they bought moreshares at newly lowered prices. When bubbles burst, those on the bottom literally paytwice. The first time, when they buy stocks that later tank, and again when they purchase new shares, hoping to make upfor the equity they lost when the previous bubble burst. Does this sound like an out-of-control gambling addiction to you?What happened was that the people at the top got their money out, at the top. They sold their shares before the bubbleburst. Thats why they call it pump and dump. An American president cannot let this happen with a Green Economy

for three reasons. First, the Treasury is empty and the United States now has its largest budgetdeficit ever, with the national debt exceeding $11 trillion. It doesnt have many bailouts left, and these doabsolutely nothing to solve the fundamental problem. They only impair the systems ability to respond to new challenges,

like feeding you when the time comes. Second, the infrastructure costs to assist in some kind of stabletransitionand to maintain basic services as oil and gas fade away are going to be astronomical.Third, theGreen Economy has got to produce and deliver useable solutions quickly.We cannot afford energy bridges to
http://www.chelseagreen.com/content/michael-ruppert-beware-the-green-investment-bubble/http://www.chelseagreen.com/content/michael-ruppert-beware-the-green-investment-bubble/http://www.chelseagreen.com/content/michael-ruppert-beware-the-green-investment-bubble/http://www.chelseagreen.com/content/michael-ruppert-beware-the-green-investment-bubble/


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nowhere that make great profit for investors but provide little or no real-world benefit. Ifthe Green Economy doesnt do this, then the nation will be left with a non-functioning energy infrastructure.


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2NC: Turns CaseTurns the entirety of the case the burst will make all problems worse

Victor and Yanosek 11- professor at the School of International Relations and Pacific Studies; AND***Yanosek MBA from Harvard (Victor, David G. Yanosek, Kassia. The Crisis in Clean Energy: Stark Realities of theRenewables Craze. August, 2011. Proquest BRW)

After years of staggering growth, the clean-energy industry is headed for a crisis. In most of the Westerncountries leading the industry, the public subsidiesthat have propelled it to 25 percent annual growth rates in recentyears have now become politically unsustainable. Temporary government stimulus programs-which in2010 supplied one-fifth of the record investment in clean energy worldwide-have merely delayed the bad news. Last year,after 20 years of growth, the number of new wind turbine installations dropped for the first time; in the United States, the

figure fell by as much as half. The market value of leading clean-energy equipmentmanufacturing companies has plummeted and is poised to decline further as governmentsupport for the industry erodes. The coming crisis could make some ofthe toughest foreignpolicy challenges facing the United States-from energy insecurity to the trade deficitto global warming-even more difficult to resolve. The revolution in clean energy wassupposed to help fix these problems while also creating green jobs that would power theeconomic recovery. Some niches in clean energy will still be profitable, such as residential rooftop solarinstallations and biofuel made from Brazilian sugar cane, which is already competitive with oil. But overall, the picture isgrim. This is true not only for the United States but also for the rest of the world, because the market for clean-energy

technologies is global.

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