It is good to see one of my old followings in the news this week. Sure, it has taken several years for the company to do anything remotely strategically oriented, but it is better now than never.

I first started tracking Rentech (AMEX:RTK) in 2005 during the first leg of the nation’s latest alternative-energy boom. As speculation about the company’s Fischer-Tropsch technology grew by the minute, shares of the tiny firm surged. The investors that timed it perfectly had a shot at gains of 400% or more.

Gains on speculation typically are not sustainable. Eventually the company has to produce results.  Rentech was far from successful in that department.

That is until Wednesday of this week when the company announced news that would send shares up by as much as 85%. For investors that had given up on the speculative penny stock, it was a sharp wake-up call.

The sudden surge in the company’s value comes from a breakthrough in the aviation industry. A committee at the standards-creating agency ASTM unanimously approved a measure that would allow commercial aviation jet fuel to contain up to 50% synthetic Fischer-Tropsch fuel.

The news means Rentech’s synthetic fuel, RenJet, now has a shot as a player in a very big industry.

If you are not familiar with the kind of technology Rentech is using, Fischer-Tropsch is a process that takes gas from coal, coke, even biomass and turns it into a liquid hydrocarbon product, like jet fuel, diesel or naptha.

It is old technology (the Nazis used it) that was historically too expensive to be considered profitable. But now with higher energy prices and lower input prices, Fischer-Tropsch is slowly making its way into the mainstream.

Succeeding where nobody else ever has

With the market wide open, Rentech chief focus must be to take its product from a demonstration stage to a production stage. The key variable, of course, is whether the company can do it with any sort of profit margin.

After shares soared earlier in the week, they have since dropped significantly. As I write, investors are buying shares at a 12% discount to yesterday’s closing price.

Folks interested in the company should focus on Rentech’s upcoming earnings figures on August 11. With liquidity a major variable going forward, you can bet the Street will focus on cash flows and balance-sheet improvements.

If word is positive from the company’s executives this week’s action could be a strong foreshadowing of good things to come. If done well, Fischer-Tropsch technology could be the transitive fuel source this country needs as it seeks its energy independence.

Source: Rentech: Getting Ready to Fuel an Industry

The auto sector comes close, especially companies like GM, Ford, and Chrysler that depend heavily on truck sales. But at least auto companies can change their mix of vehicles to adapt to high gas prices. They may not be able to sidestep all the pain of high gas prices, but at least they have options.

So what options do the airlines have? They’ve already cut costs to the bone. And from the feedback I’ve received, it seems like they’ve royally pissed off passengers and employees alike.

IDE reader, Wayne said I shouldn’t be pointing the finger at unions or the costs of legacy benefits: “…most U.S. legacy carrier employees have had their incomes slashed by at least 40% and have either watched as their pensions were frozen or dissolved.  Along with the pay cuts, premiums on health care doubled, work rules returned to the dark ages, and even crew meals were eliminated.”

Sadly, Wayne is right. Employees have taken it on the chin.

But other readers say it’s the passengers who are taking it on the chin. Jean-Antoine, for one, resents how passengers are being treated. He says, “whilst we are being asked to pay (and it’s only normal) for our transportation costs, we are treated like rotten meat. Some one or two decades ago the airlines were going out of their way to make you feel happy to board an airplane. Nowadays you are being engulfed in huge airports where nobody can give you proper directions… where the personnel is overworked, most of the time disagreeable and often not concerned…”

Harsh words from Jean-Antoine but he wasn’t the only one who took this view. Can anybody disagree that there’s been a sharp deterioration of services? It’s pretty clear that customers don’t get the attention, food, and friendly service they used to get.

Just yesterday, United announced it’s going to ground 94 (64 in addition to the 30 previously stated) 737 jets, plus some of its bigger 747’s. What’s more, they’re expected to announce more employee reductions on top of the 500 they’ve already said they would cut.

Airlines have disaffected their two most important constituencies: employees and customers, and what do they have to show for it? Not much. Their collective backs are still up against the wall…

The question is: can they do anything now to avoid downsizing?

Hubs are expensive to maintain. Can they simply drop some of their money-losing hubs? Can they go further and adopt the low-cost carrier model?

The big problem with this line of thinking is that high fuel prices are sabotaging the profits of the low-cost carries too.

Whether legacy or low-cost, you can’t fill half or three quarters of a plane with people at 1988 prices, have it run on jet fuel that costs $161 a barrel, and make money.

The reality is that lots of low-cost airlines have also struggled. In the past six months, at least a dozen airlines have failed as oil rose. American companies ATA, Frontier, Skybus and Aloha Airlines have all filed for chapter 11 bankruptcy protection this year.

In all, about two dozen low-cost carriers and other non-legacy carriers have filed for bankruptcy or gone out of business since 2000.

But listen, retailers, restaurants, high tech and industrial manufacturers fail all the time. The airline industry has simply proved not to be the exception. And higher fuel prices are sure to increase the rate of failure (or bankruptcy) in this sector.

As Stephen Ridgeway, the chief executive of Virgin Atlantic Airways, recently said, “The good times are over.”

Let the downsizing begin. Only then can supply and demand rebalance and ticket prices start to rise. There’s no other cure.

Good Trading,
Andrew Gordon

P.S.  To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.

Source: Airing It Out

Take oil. As Gabriel and Al mentioned in Money Morning earlier this week, the correction is on. Oil was down another two dollars in U.S. trading around US$122. And it wasn’t even the thundering of George Soros in front of Congress that scared speculators out of their positions, either.

High prices, as the saying goes, are the cure for high prices. “Cure” may not be the best word, though, especially if you’re an airline company or a car maker. Here in the States, United Airlines announced it would cut its domestic service Ted (the equivalent of Jetstar), cut 1,100 jobs, and retire about 70 planes, including the lumbering, old, creaky 747s that fly the Sydney to LA and Sydney to San Francisco route.

Why the drastic measures? Jet fuel prices are up 89% in the last year. High prices. The auto industry is finally reacting to high prices as well. General Motors announced it would close four truck and SUV plants in the U.S. and shed 10,000 jobs. GM’s capacity to build gas-guzzling trucks will decline by 35%.

It’s been a long time coming. And while GM makes fewer bigger cars, the company plans to make a new smaller, more fuel-efficient car. It also plans to get into the plug in hybrid market with the Chevy Volt.

Jets and cars and oil prices. Demand is finally destroyed by high prices. Of course the demand destruction in the transportation and travel market means a contraction of an economic activity. It also means, as GM’s CEO Rick Wagoner suggested, a permanent shift to a world where cheap energy is no longer the assumption. Maybe we’re moving toward a different living arrangement after all. Hmmn.

Much too late in the game, Fed chairmen Ben Bernanke is talking up the dollar, as if kind words were any replacement for a real yield. Bernanke is trying to talk people out of being worried about the very inflation his monetary policy has caused worldwide. He told listeners to a commencement speech at Harvard that heightened inflation expectations by the public are a “significant concern.”

But don’t worry, he continued. This ain’t nothing like the 70s. It’s all good. Nothing to see here. Move along. Go away. Shut up. Goodbye.

“We see little indication today of the beginnings of a 1970s-style wage- price spiral,” is what Bernanke actually said. “The overall inflation rate has averaged about 3.5 percent over the past four quarters, significantly higher than we would like but much less than the double-digit rates that inflation reached in the mid-1970s.”

Well it all depends on how you measure inflation, doesn’t it? The Fed probably under reports actual inflation. But it’s also probably true that inflation hasn’t yet reached the wild levels of the 70s. For that to happen, expectations have to begin driving consumer behaviour (trading cash for tangible goods while the cash retains purchasing power) and monetary policy must become even looser to respond to tight credit markets or over-indebted consumers.

Do you really think the Fed will be raising rates this year? Not likely, with credit markets still tied up in knots and house prices in the U.S. still falling. This is one reason why we think the Aussie dollar is still a good bit to hit parity this year with the greenback.

Speaking of Australian interest rates, just when you thought it was safe to begin thinking of lower rates, more mixed signals for the RBA. The Australian Bureau of Statistics reported yesterday that Aussie GDP grew at 0.6% in the first quarter. That comes out to an annual rate of 3.6%.

That growth rate is 0.6% higher than what economists surveyed by Bloomberg expected, although it’s lower than last year’s rate of 3.9%. This is exactly the kind of economic growth that’s led the RBA to the conclusion that inflation will grow at 4.25% until some time in 2010.

Not so, says the OECD! The OECD assures us that inflation will slow to 3% by the end of next year, a full year earlier than Australia’s own central bank expects. Why? Because, “economic activity is likely to slow to below 3% in 2008 and 2009 because of tighter financial conditions and the worsening external environment. This should ease pressures on the labour market and bring inflation down to under 3% by the end of 2009.”

Well there you go. Despite all evidence to the contrary, the OECD says it will be so.

We know the DR has been a little thin on analysis of the Aussie market and the economy this week. We promise to resume our full coverage upon our return next week. Until tomorrow…

Dan Denning
The Daily Reckoning Australia

P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Source: Inflation Hasn’t Yet Reached the Wild Levels of the 70’s

And you know what? The rancor you may receive along the way is actually a good thing – as I’ve discovered at first-hand. When I wrote for TheStreet.com, the more hostility I encountered from readers, it usually meant that I was on the right track.

For example, during the height of the real estate boom, I recommended shorting Florida homebuilder and landowner St. Joe Company (NYSE: JOE). You should have seen the reaction I received! I got so much hate mail (and even a few threats) that I was sure it was a slam-dunk. It was. Within months of my column, JOE shares plunged about 50%.

I’ve enjoyed many calls like that over my career. But this one could be the most ambitious and optimistic one yet.

That’s because if there is one market industry that is so unpopular and so universally hated right now that you’ll probably think I’ve lost my mind to even suggest that it can bounce back. Can you guess what it is?

Ladies And Gentlemen… Welcome Aboard As We “Struggle For Survival”

I believe you need to keep your eyes on the airlines.

There… I said it.

I can imagine the incredulous look on your face at the moment – and I can understand why. Let’s deal with the bad news first…

The biggest and most obvious pressure right now is oil sitting at $126 a barrefl. Jet fuel has soared 50% since January alone and it doesn’t take a rocket scientist to know that this is disastrous for the long-term health of the industry. On Monday, chief executive of the International Air Transport Association (IATA), Giovanni Bisignani said, “The situation is desperate” and the entire industry is “struggling for survival.”

Already, 24 airlines have folded since the start of the year, with Britain’s business class-only airline, Silverjet, becoming the latest victim on May 30.

The group says the airline industry’s fuel bill will soar by $40 billion this year to a total of $176 billion. If oil prices edge back towards the record of $135 a couple of weeks ago and continue to trade there, it says that would turn the industry’s $5.6 billion in profit last year into a $6.1 billion loss. However, if oil drops back to $107 a barrel, that loss would “only” be $2.3 billion. But no matter what the price is, the problem is compounded by the weak economy and soaring consumer costs.

For sure, the industry is praying that oil is not just taking another temporary breather at the moment on the way to $200 (as some economists believe).

That’s the bad news. Now let’s look at the other side…

The “Nickel And Diming” Continues… But Planes Are Still Packed

Have you flown lately?

As I write, I just arrived in Lake Tahoe, where I’m speaking at an investment conference after another long plane ride from Florida.

I’ve been on an airplane at least once a month (and usually more) for the past year. But despite all the gloom and doom projections, I can’t remember the last time I had a vacant seat next to me. In fact, I can’t remember ever seeing many empty seats at all.

With record high oil prices squeezing profit margins, airlines are figuring out new ways to maximize revenue.

Many have imposed passenger fuel surcharges, which are increasing in line with oil prices (just today, British Airways’ latest surcharge increase came into effect – the 11^th time the airline has hiked it). Some are now charging for checked bags, meals, even headsets.

While this “nickel and diming” approach doesn’t make customers happy, airlines know that many folks have no other choice. Sure, they can take Amtrak if they don’t like it – but that option is often unrealistic.

So while others may scoff, I’m going to ask whether it’s possible to profit from the airline industry…

A Two-Year Tale Of Woe… But Watch For “Basing”Take a look at the graphic below. It’s a two-year chart of the AMEX Airline Index ($XAL).

In a word: Awful. And just as I expected back in September.

In my September 25, 2007 column, when the index was trading in the mid 40s, I said:

“I expect the index to slip back to support at $40. But with oil prices rising in what is usually a quieter period for airlines before the busy holiday season, I wouldn’t be surprised if the index breaks that support level – particularly if the broader stock market (still under some pressure) turns south. In that case, we could see a serious selloff.”

Yep, I’d say so! I certainly don’t suggest that you try to “catch a falling knife” here. However, don’t forget that the market is a forward-looking mechanism. This means that if stocks are rising (or simply stop falling) during a recession, it’s because the market is projecting a recovery.

Keep an eye on the XAL chart. Should the index “base” (stop going down and then flatline), or even reverse the downtrend and head higher, the market is likely signaling a recovery.

I wouldn’t necessarily get into airline stocks for the long term, as I believe the business model is flawed, but an intermediate-term trade seems quite reasonable once the bleeding stops.

And if you’re looking for a couple of the best individual companies (or at least ones whose charts don’t look as abysmal as their peers), check out Alaska Air Group (NYSE: ALK) and Southwest Airlines (NYSE: LUV). Keep them on your radar, as they could be early indicators for the broader sector’s recovery. At that point, you might be able to pick up some bargain basement airline stocks and turn it into a meaningful gain.

Buckle Up… The Seat Belt Sign Is OnI acknowledge that this call may be a bit early, but I want you to think about it now, so that when the time comes to act, you’ll be ready to pounce and know what to do, rather than considering the idea for the first time.

But be warned: Buckle your seatbelts and make sure your seat and tray-table are in the upright and locked position. The airline outlook is likely to be turbulent for a while longer. However, once it stops, the skies may be quite friendly to your portfolio.

Hoping your longs go up and your shorts go down.

Marc Lichtenfeld

Source: Can You Profit From the Market’s Worst Industry?

It now applies to a wide variety of similar processes for converting coal, biomass and other carbon intensive feed-stocks into usable products such as diesel and jet fuel.

These two scientists at the Kaiser Wilhelm Institute invented the process because of a petroleum shortage, increased demand and skyrocketing prices – similar to what the United States faces today. During World War II, Germany used the technology to keep Hitler’s war-machine running.

By 1944, Germany’s annual synthetic fuel production reached more than 124,000 barrels per day from 25 plants. After the war, captured German scientists continued to improve the process in the United States.

But the technology faded after the 1980s. That’s when Congress passed the Energy Security Act, which birthed the Synthetic Fuels Corp (SFC). SFC spent over $88 billion in government loans and incentives, with the goal of creating two million barrels a day of synthetic oil within seven years.

SFC was launched in 1980 and it folded in 1986 after spending billions without providing any fuel. In the grinding recession of the early 1980s, oil prices sunk from more than $39 a barrel to less than $8 a barrel. Synthetic oil became a financial bust.

Now the economics have changed…

With Oil Trading at $130 per barrel, Synthetic Fuel is a “No-Brainer”

The process works like this: Coal is broken into its components by subjecting it to high temperature and pressure, using steam and measured amounts of oxygen. This leads to the production of synthetic gas.

Because the United States has benefited from years of low price petroleum, the leader in synthetic gas grew up in South Africa. The global leader is Sasol (NYSE: SSL). Sasol uses coal and natural gas as a feedstock to produce a variety of synthetic petroleum products. Sasol produces most of South Africa’s diesel fuel using a modified Fischer-Tropsch process.

This process helped South Africa to meet energy needs during its economic isolation under Apartheid. Sasol’s process has received recent investor attention because they produce a low-sulfur diesel fuel, which minimizes the environmental impacts. As a result its stock has soared.

In the United States, a small firm named Rentech, Inc. (AMEX: RTK) provides technology to produce ultra-clean synthetic fuels and chemicals. It licenses its proprietary derivative process from the Fischer-Tropsch method.

It converts synthesis gas derived from coal, petroleum coke, biomass, natural gas, or municipal solid waste into liquid hydrocarbon products. This includes ultra clean diesel fuel, jet fuel, naphtha, specialty chemicals and other fuel products. Rentech also manufactures anhydrous ammonia, UAN, nitric acid, carbon dioxide and granular and liquid urea.

The US Air Force has been a leader in the utilization of these fuels. Most of the fleet is being certified to fly on a blend of synthetic and jet fuels. Recently, a B-1 Bomber became the first plane to break the sound barrier flying with a mixture that included synthetic jet fuel.

In addition, Rentech has a joint development agreement with Peabody Energy Corporation for the co-development of CTL projects that convert coal into ultra-clean transportation fuels using Rentech’s Process.

As with many companies focused on research and development of new technology, Rentech has yet to post a profit and its shares have traded in a small range for over a decade. RTK is still a highly speculative investment in one of the many potential solutions to our rising fuel costs.

So while the media hype is focused on solar, wind and even tidal power to solve our energy needs, the likely successor to petroleum will be refined from a black, sooty fuel that has been used since ancient times – coal.

I am happy to report that the United States has lots of coal, and companies operating in our free enterprise profit-incentive world are perfecting the technology to cleanly burn it in our planes, trains and automobiles.

Happy investing,

Floyd

Source: How These Two German Scientists Are Solving Our Energy Crisis

No, I will not regale you with a story of lost baggage or rude gate attendants. Actually, the flight was fine. I flew Pittsburgh to Charlotte, and then Charlotte to Houston. From my perspective, there were no travel problems. Really, even the Transportation Security Agency people in Pittsburgh showed some courtesy. That part of flying was fine.

But I’m sure glad that I am not paying for the gas for these jets out of my own petty cash. Wow! Fuel costs are killing the airlines. Almost every flight in the skies these days loses money. It does not matter how few peanuts they put in the little bags. At the very least, 20% of airline seats are going to go away within the next six months. Really, some airlines cannot ground their inefficient planes fast enough.

In the future, legacy carriers that fly packed aircraft between distant hub cities might eke out a small profit on each flight. That’s with much higher ticket prices. But the shorter hops are money losers. So the current situation cannot last. At this rate, small towns are surely going to lose air service.

It means that 70% of the nation’s airports are at risk of losing most or all of their airline service. And you have probably noticed that the U.S. passenger rail system is mostly gone, except for a few corridors.

About 45 years ago, Rachel Carson wrote a book called Silent Spring. The book sounded an alarm about the impact of man-made chemicals on the natural environment. Carson’s “silent spring” referred to the widespread destruction of bird life due to toxic poisoning and destruction of habitat.

It is time for turnabout. Mother Nature is taking her revenge in the form of high-priced oil. The cost of jet fuel is soaring. The airplanes of the world are starting to get grounded. The skies of the future will not be so crowded. Flying will cease to be an option for many tens of millions of Americans — maybe for hundreds of millions.

In the future, only the most efficient jets (like Boeing’s new 787 Dreamliner) will ever go wheels up at the end of a runway. Ticket prices will be high. How soon will these things happen? I think that we will experience our first silent spring as early as next year.

Will Policy Makers Get Energy Smart?

The next U.S. president had better get really smart on energy, and I don’t mean dusting off some loser playbook filled with failed energy policies from the 1970s (or the 1980s or 1990s or 2000s, truth be told).

I have read what passes for energy policy on the Web sites of all of the presidential candidates. None of them really gets it. None of them. It’s mostly pandering and rambling.

“Energy” is just another issue about which the candidates say as little as possible, in as plain vanilla a way as possible, while trying to sound profound. There is no original thinking. There is no courage to tell the American people what they need to hear, as if people don’t already know a lot of it. There is not even any acknowledgement of honest reality.

The U.S. needs to get its energy act together. If we screw up energy, most other things will follow the downward spiral. Call it silent spring on steroids.

Until we meet again…

Byron King

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!

Source: Silent Spring for Aviation

The day’s focal point was the weekly inventory report from the Energy Information Administration. Crude inventories rose 200,000 barrels for the week ended May 9, the EIA said.
Gasoline supplies fell more than expected last week, the EIA report showed, down 1.7 million barrels, while distillate inventories, which include heating oil and jet fuel, climbed 1.4 million barrels. But the refinery utilization rate stood at 86.6% of capacity last week, up from 85.0% a week earlier.

“Although the DOE numbers were slightly disappointing to traders’ estimates, we still had a build in crude supplies and perhaps more importantly, saw a large increase in refinery utilization rates,” said Thomas Hartmann, of Altavest Worldwide Trading.

“We’ve seen the crack spread widen materially in the last two weeks, which should encourage more gasoline production over the coming weeks as refiners see better profit margins,” Hartmann added.

Source: Crude Backs Down

There’s no doubt America has an energy problem… or maybe you could call it a fossil fuel problem. All the fuels we’ve relied on since time immemorial are skyrocketing in price. (Dinosaur bones just don’t take the old gas tank as far as they used to — as we personally discovered yesterday filling up at $4 a gallon here in NV.)

The least harmful and most clean-burning fossil fuel, natural gas, is shooting up in price, too. The North American continent (both the U.S. and Canada) has been “running to stand still” for a long time now in terms of natural gas production. The rate at which new wells are coming on line is barely keeping pace with the depletion of old wells. And nor does it help that nuclear plants are looking a lot more expensive than first realized, or that natural gas and water are required in huge quantities to unlock the black treasure of Canada’s oil sands.

As a result of these and other factors, the time has finally come for the liquid natural gas (LNG) market. The world desperately needs to be able to ferry natgas from one continent to another — like crude oil — and LNG technology is the way to do it. BreakAway Investor editor Andrew Mickey is right on top of this trend. Take a look.

Selling Out to the Highest Bidder (for Natural Gas)

by Andrew Mickey, Editor, BreakAway Investor

“We are not in the charity business. Whoever will give me the best price, I will follow him.”

- Abdullah bin Hamad al-Attiyah, Oil Minister of Qatar

Qatar is already taking advantage of this situation. And they’re making no qualms about their motivation: make as much money as possible.

But Qatar is just one small player in the next monster trend in the energy business. The situation is getting bad, real bad. The profit opportunity, however, is just as big as the situation is bad.

Already Exxon Mobil, Merrill Lynch, BHP Billiton, and dozens of others are getting in on the action. Now, as we put all the pieces of this complicated puzzle together, you can take your piece of the action, too.

Decades in the Making

For decades we’ve heard it’s coming — a completely new source of energy. But I’m not talking about some economically questionable alternative energy source or something with numbers that only “work” with lavish government subsidies. I’m talking about liquefied natural gas, or LNG.

The LNG market has been on the verge of a major breakout, seemingly for years. But the numbers just never made sense. It has taken years of infrastructure buildup to lay the foundation for the industry. And with oil companies required to shell out at least $5 billion just to build an LNG plant, they just weren’t going to take too big of a gamble.

That, however, is all rapidly changing.

Exxon Mobil, Merrill Lynch and China National Oil Company have combined to commit $30 billion to investing in new LNG facilities over the next five years. BHP has committed $25 billion for new LNG facilities in Australia. Worldwide, LNG investments are expected to eclipse $100 billion over the next decade. Warren Buffett, Shell, BP and Gazprom are all betting big on LNG.

Together, they’re all helping to nurse the LNG industry from infancy to maturity in short order. And with all these companies placing huge bets, you can bet they’re laying the foundation for a major win.

But the LNG market is still in its relative infancy. As a result, most investors just don’t understand all the details… yet. But that’s exactly what is creating an opportunity in the next big trend in energy.

We’ve got to understand three aspects of the booming LNG industry in order to profit from this situation. First, we’ve got to look at the basic nuts and bolts of the industry (how natural gas is turned into LNG and so forth). Second, we’ve got to realize natural gas will finally become a truly global commodity and the highest bidder will get the gas. Third, we’ve got to find the bottleneck — and who has is developing the solution. And that’s where we’ll put our money.

Natural Gas Goes Global

The United States has been getting natural gas on the cheap for decades. Most natural gas consumers (primarily power companies and utilities) have been paying very low prices for natural gas compared to the rest of the world. Despite the recent doubling in natural gas prices, U.S. utilities can still buy it for around $11 per million BTU (MMbtu).

The rest of the world is paying much higher prices. Spain pays $13 per MMBTU, Korea and India pay $14 per MMBTU, and Japan pays the highest price of about $15 per MMBTU.

The cause of the wide price range is pretty simple. Natural gas is produced and consumed locally. For instance, natural gas in the U.S. is produced from a well and transported via pipeline to the end-user.

Although there are some fairly long offshore pipelines, building a pipeline across the Pacific or Atlantic Oceans is technically and economically unfeasible. As a result, Asian, European, African, Australian and North American natural gas prices can vary widely. There was no way to trade natural gas on a global level.

The growth of the LNG industry is already starting to change all that. Japan recently paid $19 per MMBTU of LNG and China and Europe are also paying top dollar for LNG. But they’re happy to do it. The price may seem high now, but the long-term LNG contracts these countries have signed will save them a lot more money as natural gas prices continue to rise over the long term.

There is no transparent market for LNG. The LNG market is made up of privately negotiated contracts between suppliers and consumers. That lack of transparency is helping to keep this boom quiet for the time being.