T.Boone Pickens' proposal to run more U.S. vehicles on natural gas got a boost in Congress this week, but the energy billionaire must wait a few years before profiting from any investments linked to the plan.
An energy bill introduced on Tuesday by Senate Majority Leader Harry Reid would provide subsidies for natural gas-fired trucks and municipal vehicles, an idea long championed by Pickens as a way to curb U.S. dependence on foreign oil.
Pickens told Reuters during a January interview: "I'm long natural gas, not in 2010, but out beyond 2010." He noted that his position was influenced by high U.S. natural gas reserves.
A Senate vote on the legislation, which includes subsidies for natural gas vehicles up to 18-wheelers and construction of filling stations, is expected shortly. But before becoming law, the bill must also pass in the House of Representatives.
Hedge fund managers and analysts said it was too early to tell whether the bill would support a long position in natural gas. Building infrastructure for natural gas-fueled transport could take years.
Prices for natural gas futures contracts beyond mid-2011 could get a boost "if there is any traction, or perceived traction to this plan," said Mike Guido, head of hedge fund sales in commodities for Macquarie Bank in New York. "It could lend a bid further out the curve, but there's not much of an impact for the next 12 months." (Graphic: link.reuters.com/det32n )
Pickens' Clean Energy Fuels Corp. which supplies natural gas to some of the small fleet of existing vehicles, also stands to benefit.
Pickens was unavailable for comment, but spokesman Jay Rosser said: "The notion that Boone's in this to make money is nonsensical. Remember, he has spent well over $60 million on the Pickens Plan campaign," adding that his intention is to avoid saddling future generations "with such a national security or economic burden."
Rosser did not provide information about Pickens' current holdings in the gas market but said his firm, BP Capital, has held both long and short positions in the natural gas market this year.
Natural gas prices settled at $4.82 per mmBtu on Thursday, up about 23 percent since May's lows, but far below the peak of more than $13 reached in July 2008.
SHORT-TERM TRADE CHOPPY
Hedge fund managers say it would not make sense to take a long position on natural gas based on the current status of the legislation. They said a shift to gas as a transportation fuel would probably create a choppy price environment as supply and demand duke it out. Hedge funds generally exploit such volatile price environments and welcome them as opposed to steadier prices based on more predictable supply and demand....MORE