Natural Gas Becoming Safe Energy Bet

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"The so-called 'technical knockout' may be having its day, as its rival energy sources come under a cloud."

Natural gas may be having its day, as its rival energy sources come under a cloud.

Natural gas has overcome two of its biggest hurdles—volatile prices and questionable supplies. In large part because of new discoveries in the United States and abroad that have significantly increased known reserves, natural gas prices have been relatively low in the last two years.

"At the end of the day, when you look at the risk-reward equation, natural gas comes out as a winner," said Lawrence J. Goldstein, an economist at the Energy Policy Research Foundation. "It's a technical knockout."

Financial markets have already started to price in this new interest in gas. Since the disaster in Japan, uranium prices have dropped by 30%, while natural gas prices in Europe and the U.S. have risen by about 10%. Officials from several countries, including China, Germany, Finland and South Africa, said they would review their nuclear strategies.

Utilities may need to reconsider the role of natural gas in providing stable power, a function historically filled by coal and nuclear energy. Utility chiefs have been wary of price fluctuations of natural gas, particularly in the last two decades.

But that may be about to change.

A report last week by the Bipartisan Policy Center and the American Clean Skies Foundation predicted that natural gas consumption will increase because of an abundance of new supplies, including in the U.S., that are likely to keep prices relatively low.

Many oil companies have anticipated this shift. At Royal Dutch Shell Plc (NYSE:RDS.A; NYSE:RDS.B), natural gas production overtook its oil output in recent years.

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