Did somebody say, LNG

Drill for it, extract it, cool and liquefy it, ship it overseas, expand it by around 600 times and use it for heating, transport, industrial processes and literally anything you can think of.

It’s liquid natural gas, or LNG.

LNG is a wonder fuel that’s cleaner than other hydrocarbons, but it’s still a fossil fuel that gets burned and releases carbon.

It’s also been hailed as the best ‘transitional’ fuel to bridge the gap between the high and low carbon economies (LCE).

But the rise of Environmental, Social and Governance (ESG) investment/divestment mandates has put a lid on many new fossil fuel developments, and this has led to underinvestment.

Underinvestment puts stress on existing producers and creates demand/supply imbalances.

At present, renewable energy can’t rectify the energy imbalance because there’s just not enough of it, and uranium is still a socio-political hot potato.

Solution? More LNG from existing producers, and that’s why prices have rocketed.

Here’s what the Asia price action looks like for a massive global transitional commodity like LNG.

14x becomes a problem

Yup, it’s gone nearly 14x since the bottom of the oil contango trough, in early 2020.

And while it didn’t matter a whole lot during the COVID lockdown period, it does matter a whole lot now.

The world’s moving to asynchronous re-openings and the new ‘red under the bed’ is inflation - or is that Putin, or maybe both - and high food, rent and energy prices aren’t so good for governments that have their eyes on re-election.

Still, these price shocks are getting noticed more and more each day.

And to put the 14x into its proper relativity, the next chart shows by how much LNG prices have crushed almost all other key bulk commodities.

The dotted black line is the one you want.

LNG’s basically come from behind, cut across the others and pulled out a Bradbury (no offence Steve 🖐😁).

And guess what, that insane pricing tells me the worlds’ nowhere near being ESG ready.

Mike