China, which has been on the world-wide prowl to tie up oil supplies for the next 20 years has figure out that the future is not in oil, but in natural gas. According to an article on Marketwatch.com, “China plans to increase natural gas production and consumption for oil” because they have done the math and now “acknowledge that natural gas costs 36 percent as much as oil.

As Boone Pickens said on CNBC just a week ago, natural gas is significantly cheaper than oil. According to the Marketwatch article by Myra Saefong,

“Natural-gas is a much cheaper alternative to oil, making it particularly more attractive as an energy source.

“The current natural-gas price of $5 (per million British thermal units) is equal to $29 a barrel of oil equivalent in heat-value terms, which represents about a $50-a-barrel discount to crude oil’s current price of about $80 a barrel.”

Analysts at Yuanta Research said in a note to their clients:

“This discount is driving the energy industry towards increasing gas consumption, particularly in applications that can replace oil.”

One of the applications for which natural gas can replace oil is as a transportation fuel. In February the US imported 322 million barrels of petroleum at a total cost of $24.6 billion. At that rate – even in a short month with the world still attempting to shake off the recession, the U.S. is still on track to send approximately a third of a trillion dollars out of the country to pay for our gasoline and diesel.

According to the research note: “China has about 11 years of reserves-to-production for oil, compared with about 32 years for natural gas.”

In comparison, North America has over 118 years of natural gas reserves, while we import hundreds of millions of barrels of oil a month.

The Yuanta Research note concluded with:

“Given that China is short of oil, we believe the country will increase natural gas production aggressively to reduce its reliance on oil.”

The Pickens Plan position is:

“Given that the United States is short of oil, the country should increase its natural gas consumption aggressively to reduce our reliance on oil.”

The NAT GAS Act (H.R. 1835 and S. 1408) which are currently in committee in the U.S. Congress would create incentives to immediately begin moving fleet vehicles from imported gasoline or diesel to domestic natural gas.

— The Pickens Team