Energy Capital (Jan 11-15)

On Tuesday, the Energy Information Administration released their Short-Term Energy Outlook:

• oil market is expected to gradually tighten over the next two years, assuming an economic recovery continues,
• world oil demand is projected to grow by 1.1 million barrels per day this year, followed by a 1.5 million barrel per day increase in 2011. It should come as no surprise that China's leading the charge,
• higher production in the U.S., Brazil, and the former Soviet Union are the biggest factors in non-OPEC supply growth.
• Although oil prices in 2010 are expected to range between $60 and $100 per barrel, the $80/bbl mark is seen as the "comfort zone" for most analysts. Whenever oil falls below $70 per barrel, we're in danger of losing crucial investments needed for future supply. On the flip side, producers need to be wary of public outrage whenever we see triple-digit oil prices.

Unlike oil, demand for natural gas is projected to remain relatively flat in 2010. Even after the number of natural gas rigs declined by approximately 60% in 2009, production still managed to increase by nearly 4%. With such an abundance of natural gas, how can we not take advantage of the situation?

Take Oilman T. Boone Pickens, for example. He is one of the few people out there that actually has a plan to face the upcoming energy crisis. This week, that plan changed gears when the billionaire announced that he has halved his order for wind turbines from GE, postponing his plans for a Texas wind farm. The 300 turbines he does receive will be sent to projects in Minnesota. This means that Pickens will be focusing his attention on a campaign to convert trucks to natural gas.

With coal prices already at a 14-month high, get ready for even higher prices. We can thank China for the boost. China, the world's largest coal consumer, might be forced to shut 11% of its power generators due to coal shortages.