Commodity Fundamentals: How to Trade the Precious Metals, Energy, Grain, and Tropical Commodity Markets

CHAPTER 14

Natural Gas

OVERVIEW

Natural gas, a fossil fuel, has long been prized for its ability to burn cleanly and provide relatively high levels of energy. As early as 500 BCE, the Chinese started using natural gas, forcing it through bamboo pipes in order to distill drinking water from seawater. The first commercial use of natural gas was in Britain, where gas was produced from coal to light streetlamps in 1785. It was not until 1821, however, that an American, William Hart, dug the first well specifically designed to recover natural gas.

Today, natural gas represents about a quarter of total U.S. energy consumption and continues to grow in popularity because it burns so cleanly. It is colorless and odorless. Its pure form consists of a mixture of hydrocarbon gases—mainly methane, a molecule consisting of one carbon atom and four hydrogen atoms.

Scientists believe that natural gas, like other fossil fuels, was formed from the compression of organic matter deep inside the earth. Natural gas and oil are generally found together in deposits beneath the earth's crust. The deeper the deposits lie, the greater is the percentage of natural gas in the deposit relative to the amount of oil.

Normally, natural gas escapes through layers of porous rock till it reaches the earth's surface and dissipates into the air. In some locations, however, porous rock—which soaks up natural gas like a sponge—is topped by impermeable sedimentary rock, which covers the porous rock like an umbrella. ...