by Bryan Perry
July 29, 2025
Coming into the summer months, natural gas prices jumped to $4.00 per million British Thermal Units (MMBtu) in anticipation of scorching temperatures and peak demand. Now that we are entering the latter part of summer, also called the “shoulder months,” when less cooling and heating are required, natural gas futures have pulled back to the low $3.00/MMBtu level that has proven to be a good price support level.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The AI revolution, the on-shoring of manufacturing back into the U.S. and the electrification of America’s transportation (mostly via EVs) is driving up electricity prices amid soaring demand. Residential electricity prices have jumped nearly 30% since 2021, far outpacing inflation. (source: powerlines.org).
Also, ICF International published a report on future energy demand on June 9, 2025. It lays out the surging need for power that will see a 25% increase by 2030 and 78% by 2050 compared to 2023 levels.
AI and Data Centers are among the fastest-growing electricity consumers, with hyper-scale facilities requiring massive, continuous power. As of mid-2025, more than 70% of projected data center capacity under construction has already been pre-leased, indicating strong demand and rapid development.
Companies are leasing space up to 36 months in advance, suggesting that many facilities are still in development but already committed, as we anticipate strong growth for electricity and peak demand:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
As of 2024, natural gas powers over 40% of the U.S. electricity grid, making it the largest single fuel source for electricity generation. That’s double its share from two decades ago, reflecting a major shift in how the country balances energy needs, reliability, and emissions. Builders of electrical grid infrastructure are targeting renewable energy as the long-term solution, but such solutions take longer to construct and deploy than using natural gas as the most rapid method of creating what is called dispatchable power. Unlike solar, wind and nuclear, gas plants can ramp up quickly to meet current and imminent demand.
EnergyInDepth.org stated this very succinctly: Grid reliability driven by natural gas is paramount to ensuring equitable, affordable access to energy for Americans across the United States, especially those living in areas prone to extreme weather events. This summer, many parts of the United States saw record-breaking temperatures, which increased demand. Peak demand, alongside the shift towards electrification, resulted in more strain on power grids across the nation. While several utility operators warned about potential power disruptions, they agreed that ultimately natural gas was essential in securing the power grid and keeping the power on, noting that natural gas “remained a bedrock.”
As investors chased the hyper-scalers and stocks of companies constructing the power plants to provide the tsunami of future electricity production, companies that store and transfer natural gas have consolidated in the past four months and trade off their pre-April levels. Lower share prices for pipeline stocks coupled with low natural gas prices and rising volume makes for a compelling investment proposition.
Pipeline operators across North America are seeing a significant surge in natural gas volumes, driven by booming electricity demand. Deliveries to U.S. power plants rose 11% year-over-year, setting quarterly records for operators like TC Energy. By 2030, data centers alone could add up to 8 billion cubic feet/day of natural gas demand—about 21% of current U.S. power generation gas use (source: NAI500.com).
There are several ETFs that stand out in the natural gas pipeline sector that not only pay very attractive dividend yields, but they also convert all the K-1 related income from the Master Limited Partnerships (MLPs) they own into ordinary 1099 dividend income. This feature alone is a deal maker for investors that loath the K-1 reporting process. Plus, investors are buying into a diversified portfolio within the sector and receive monthly payouts to boot. Here are some of the top-performing MLP ETFs in 2025, based on yield, returns, and assets under management. These funds focus on midstream energy infrastructure like pipelines and storage, offering high income potential and tax-advantaged distributions.
This investment theme has the support of the current administration and the Department of Energy to drive domestic supply, massive exports in the form of Liquified Natural Gas (LNG) and to establish long-term energy independence. Income oriented investors have a sweet spot to capture highly attractive yields, clear visibility for growth, and the potential for capital appreciation without geopolitical risks.
Natural gas is cheap, clean, domestically abundant, does not make a mess if spilled and in high demand.
Sounds like a secular bull trend to me.
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