Natural gas ETF | list of funds and introduction

There are generally two kinds of natural gas ETFs that you can get.  There are ones that track commodity indexes.  These deal in futures contracts as it’s underlying basket of securities.  Or you can go with a more traditional one that invests in equities (stocks).

ETF Fund List

Here is a natural gas ETF list that is exclusively in gas (not including oil).

  • United States Natural Gas Fund (UNG)- Commodities
  • ETFS Natural Gas (NGAS) – Commodities
  • iPath Dow Jones-UBS Natural Gas Subindex Total Return ETN (GAZ) – Commodities
  • First Trust ISE-Revere Natural Gas Index Fund (FCG) – Equities

Here is a list of natural gas ETF funds that are involved in both oil & natural gas, a common pairing because gas is a natural by-product of oil production.

  • SPDR S&P Oil & Gas Equipment & Services ETF (XES)
  • IShares Dow Jones US Oil & Gas Exploration ETF (IEO)
  • PowerShares Dynamic Oil & Gas Services Portfolio (PXJ)
  • ProShares UltraShort Oil & Gas (DUG
  • ProShares Ultra Oil & Gas (DIG)

Canadian ETF tracking the NGX Canadian Natural Gas Index:

  • Claymore Natural Gas Commodity ETF

Although there are many ways to play this market, there are some experts that say the best natural gas etf is one that invests in equities instead of commodity futures.  The only one currently in that category is the First Trust ISE-Revere Natural Gas Index Fund (FCG).  The reason is because futures are tricky.  These funds don’t hold long term securities.  Instead they have massive transactions every few months when the futures contracts come up.

Fueling the Growth of Natural Gas

Here are several very good reasons why gas should rise considerably in demand over the next few years.  It is good investment advice to look into this industry as a possible growth sector in the coming years.  Companies like Exxon Mobil have bought natural gas companies like XTO Energy for $41 billion, which should give you a indication of where this industry is headed.

  • It burns up to 30-60% cleaner than oil or coal power.
  • With global initiatives to reduce climate change emissions, gas is the best alternative to take the place of oil.
  • It’s also our best chance to get off of our dependence on foreign oil.
  • The US has enough to fuel our consumption for up to the next 100 years.

Climate Change – Cleaner Burning Fuel

Gas is known as the cleanest of the fossil fuels.  It has shown to emit up to 30% less carbon emissions for vehicles and 40% for power generation than oil.  And it can burn as much as 45% cleaner than coal.

When it comes to power generating industries, gas will win out.  Nuclear power is always a clean option, but a very complicated issue.  Then there is coal, which is very dirty.  If you think that world governments will eventually put a tax on carbon emissions, it would be a safer bet to build a gas power plant than a coal powered one.

Climate change has become one of the defining issues of this generation and it will continue to be in the forefront for the next 50-100 years.  With this public consciousness about trying to reduce our greenhouse gases, natural gas is the obvious choice to cleaner energy.

Wind and solar technology is cleaner than gas.  Even so, much of the advances that are required for wind and solar to replace oil is still very far off.  The conversion of our vehicles and power generating needs can be a lot more easily done with natural gas.  In fact, much of it is beginning to already occur.

There are many cars, trucks and buses that are already running on gas in the US and across the globe.  As the negative affects of oil become increasingly felt, gas will be the hero to save the day.

Foreign Oil and National Security

We have seen the significance that foreign oil plays into global geopolitics.  Many have pointed out the national security issues that dependence on foreign oil brings up.  Critics say that our dependence on oil to run our economy makes us vulnerable to oil producing states like those in the Middle East.

In fact, many have said that our invasion of Iraq was largely fueled by our need for Middle Eastern oil.  No matter how true that may be, everyone agrees that our need for foreign oil is a huge national security and economic problem.

Gas is probably the best alternative to get off our dependence.  Currently, the US has 238 trillion cubic feet of proven gas reserves domestically.  There is an additional estimated 1.8 quadrillion cubic feet more of gas underneath our feet.  This reserve could fuel the US economy for decades to come without the need for foreign oil.  It would also buy time to develop other sources of renewable energy like wind, solar and biofuel.

Natural gas companies have come up with a way to extract gas from shale.  Extracting shale gas has become one of the most significant methods of getting gas in the US.  Now this method is being used in other parts of the world like Canada and South America.  Shale gas technology could equalize power over gas prices worldwide, making them cheaper overall.

ETF – Exchange Traded Funds

There are several advantages to investing in ETFs.  First of all you are investing in entire sectors or a basket of securities.  That means you can take advantage of market growth, not just individual companies.  This keeps you diversified across a single sector.  Also, by utilizing this investment strategy you can trade during the normal market hours. This is in contrast to a mutual fund where you can invest only once a day at the end of the day.

Natural Gas Power Generation

Another important factor is power generation.  Nuclear power used to be the next big thing in energy just a few years back.  The hoopla was complete with President Obama going to the groundbreaking of a South Carolina nuclear power plant.

Now with the price of natural gas going down and the supply going up, gas power plants are going to be the next big thing.  They are cheaper than nuclear and cleaner than coal.  What more can you ask for?

Fracking – New Drilling Technologies

There is a new method of extracting gas called fracking.  This is where enormous amounts of water, chemicals and sand are used to blast pores into shale rock.  Then the gas is extracted from places that were previously in accessible.  This has revolutionized this industry and brought new life to this industry in the US.  There are some criticisms and environmental concerns that have not be definitive as of yet.  Once they are, it will be addressed by this industry and the US government.

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