While gas prices were poised to hit a high of 82% in October in line with the upcoming energy price hike, new Prime Minister Liz Truss recently announced a new policy that will cap the amount households have to pay .
More specifically, the typical UK household will now pay no more than £2,500 a year for two years, which is equivalent to a relatively affordable amount of £208.33 a month.
However, this does not mean that gas companies or stocks are no longer attractive to investors, especially in the short term. But why else is now a good time to invest in natural gas stocks in particular?
What are the causes of the rises in world gas prices?
In August, it was revealed that gas prices in Europe had risen about 10 times their average over the previous decade.
This trend was even more prevalent and pronounced in the UK, with the cost of UK gas hitting an incredible high of 537 pence per therm (a measure of gas consumption) last month. In February, it was only 38 pence per thermhighlighting the exponential growth of prices in an incredibly short period.
But what is behind this price increase? Well, prices had already started to rise towards the end of 2021, when the final global coronavirus lockdowns were lifted and economies began to return to normal. This caused energy demand to skyrocket globally, with an unchanged supply level causing prices to rise exponentially.
This problem was further exacerbated in February when Russia invaded Ukraine and triggered a conflict that reduced the supply and flow of oil and natural gas to Europe. With a much larger imbalance between supply and demand, wholesale prices have risen at an even steeper rate and this burden has largely shifted to end users.
At the same time, European governments have sought to sanction Russia in part by reducing its energy imports from the region. This caused the price of alternative sources and natural gas to rise as a result, while this trend shows no signs of slowing down anytime soon.
Why now is a good time to invest in natural gas
Natural gas has undoubtedly seen a huge increase in demand lately, largely because it is not dependent on oil and can be sourced from a wider range of locations around the world.
As a result, now may be the ideal time to invest in natural gas stocks, which offer potential value as a speculative asset and are likely to appreciate steadily for the next 20 years or more.
In terms of the above, CFDs offer a great way to trade natural gas and fluctuating market prices. This is because they are largely speculative and allow you to make a profit without taking ownership of the underlying asset or financial instrument.
In this way, you can also trade associated indices and CFDs through the NASDAQ, which can help minimize your risk exposure over time.
However, if you prefer buy-and-hold investment strategies that provide a secure store of wealth, natural gas also offers a viable option.
More specifically, the International Energy Agency has forecast that natural gas demand will rise an additional 31% through 2040, outpacing the expected 21% increase in oil demand. Therefore, you can invest in specific stocks and hold them as they appreciate, while planning for a viable exit from the trade at some point in the future.