Investment, economic and employment implications
In terms of investment, natural gas is “a poor idea”, the note says, citing how the Obama administration is introducing bills to inhibit the export of US natural gas to “protect consumers and businesses from rising prices”. Upward pressures on prices are therefore “unlikely anytime soon”.
On the other hand, from an economic perspective, lower natural gas prices have both short- and long-term benefits. For example, although the price of gasoline has increased by 24 per cent since January 2010, the effect on overall consumer price index has been “partly offset by the 12 per cent decline in piped (utility) gas prices,” with annualized overall inflation of just 2.3 per cent.
With regards to employment, this new gas market structure has presented itself as an additional source of job creation, in light of the numerous projects it creates, the firm says.
However, Lombard Odier predicts that the demand for natural gas will “increase dramatically” in the future, as while natural gas is currently used primarily for electricity generation, it will eventually replace oil, coal and nuclear energy.