The ugly bear market in natural gas may be about to end, in our opinion. The nuclear crisis in Japan will force policymakers to look for alternative energy sources for electricity generation and natural gas is set up perfectly.
Natural gas is cheap relative to crude oil and trades for about $3.90 per 1 MM British Thermal Units (BTUs). A barrel of crude oil, for example, consists of 5.6 M BTUs and at $115 per bbl trades at $20.50 per 1 M BTUs.
The BTU equivalent price for a barrel of crude should therefore be $20.50 per bbl, excluding the issues of transportation and other factors. The fact gas is difficult to transport excludes it from the “China is buying everything” story making it an anathema to speculators and hedge funds.
The following charts compare the evolution of France and Italy’s electricity generation by fuel type. Much of this depends on access to the fuel type, but the path of the two countries couldn’t be more different. France has moved to an almost total dependence on nuclear versus Italy’s move to gas as a primary source for electricity generation. Though Italy imports electricity and France is in surplus, we believe the markets will now adjust and focus on the Italy approach and use natural gas a bridge fuel while renewable energy sources continue to development.
(click here if charts are not observable)
Global Macro Monitor 
I agree with this view and is bullish on natural gas outlook, because it is the most viable alternative fuel. Current natural gas price is weak due to oversupply of shale gas from the US, but the demand-supply situation will tilt towards natural gas’ favor in 2012 onwards
Well, sure the outlook for natural gas is bullish…. but not in the US. If you haven’t noticed, U.S. natural gas is totally disconnected from the rest of the world. I mean I can imagine U.S. gas trading in a year where it is trading right now and the rest of the world paying double what it is paying right now. There just isn’t anything in the one-year horizon that would make the prices converge with the global LNG market and I don’t think that U.S. will be at the forefront of switching away from nuclear. Even though the incentive is there, given the cheap gas.
i think it is more relevant to look at what Japan did in the past during Kobe earthquake…
http://ftalphaville.ft.com/blog/2011/03/15/514731/a-nuclear-primer-from-barcap/
Natural gas is in a bear market that will last for the rest of our lives. It will never — never — go back over $6-7. Not in the US.