Supplying Modern Society

The price of liquified natural gas (LNG) – or natural gas that has been chilled below -260˚F for transportation purposes – has soared in various parts of the world this year, notably Europe. What does this mean for the global economy and how might investors be affected?

• The problem with much of the world’s trade in natural gas is that it is landlocked and therefore localized, unlike oil which is freely tradeable worldwide. Some areas of the world in short supply of natural gas - like Europe - pay large premiums to those that have abundant local supply of the commodity, such as the United States. LNG holds the promise to reduce those price differentials by making the commodity more freely tradeable. This acute need is why we have seen a surge in U.S. LNG export growth, as depicted in the chart above.
• As we note in our recent Alger Podcast, the lack of adequate local natural gas production or terminals to receive LNG is one of the reasons Germany and other European economies are suffering from high prices of natural gas right now. From aiding in fertilizer production that’s needed to feed half the world, to powering and heating our homes as a cleaner alternative to coal, it is understandable that people will pay considerably high prices in the short-term for this essential commodity.
• We believe that companies that are helping to alleviate the LNG imbalance by building terminals and transportation infrastructure, along with software companies to aid such projects, may have strong growth opportunities. Additionally, in our view, companies that produce natural