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Why oil is sold at a premium to natural gas?

Although energy stocks on the whole as a single product are linked, the reality is that the various means of developing energy for the homes of the people are very disconnected from each other. The difference between oil and gas is perhaps one of the best examples of how two sources of energy have not yet achieved parity.

Natural gas, for now the little brother of the oil is lower. Oil is a global public good, natural gas has only a regional product. Whatmeans that oil prices are generally quite stable around the world, while gas prices can greatly vary from country to country depending on who delivers it.

The main reason for these price differences is the transportation. Transportation of gas is a niche market at the moment and everything is possible in limited amounts, is extremely expensive. Oil tankers are readily available and are the established method of transportation method for fuel. Oil has the advantage over Gas from an historic infrastructure costs down.

On the other hand, the gas is the better of the two fuels. Natural gas has the advantage of being clean burning, which reduces carbon dioxide emissions, and there is no danger of a catastrophic leak, since it with oil. However, gas is expensive to get from one end of the world to another, and that does not make it workable.

In the Middle East, both oil and gas are abundant. As> Gas has no real market value of the world's largest producers of oil but it is used to pumping more oil from the wells. Natural gas is underground to the oil level that would make it easier to increase extract drive. Without the ability to transport easily, the rich gas, where it is needed, the oil producers have no need for gas as a fuel source.

As new techniques for gas delivery are at a global level, gas could be made todominant and less of a regional energy source. Liquefied Natural Gas (LNG) is a part of the solution transforms the transient gas into a liquid, not only occupies less space, but is also easier for suppliers to handle the traffic. When gas is lighter to transport goods, the parity between the gas and oil may eventually be achieved. Experts expect them to at least a decade, however, before gas can begin with the powerthe oil companies.

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December 19th, 2009Natural Gas Prices ArticlesRead More >No Comments


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