For almost 30 years, the prices of crude oil and natural gas have moved in tandem, a spike in one sending the price of the other energy up or vice versa. Today, however, thanks in part to the discovery of enormous reserves of shale gas in North America as well as a global spike in the demand for oil, the tight pairing of these two fuels has come undone. So writes Philadelphia Inquirer Staff Writer Andrew Maykuth:
But in the last three years, the prices have become unhinged. One reason is the dramatic increase in natural gas production from unconventional formations such as Pennsylvania’s Marcellus Shale, which has driven down natural gas prices while crude oil prices have soared.
Maykuth points out that in today’s energy market natural gas delivers more than three the bang for a buck than crude oil.
When the two fossil fuels are compared on the basis of energy equivalency, natural gas is a bargain compared with oil. A dollar spent on natural gas buys more than three times the energy that a dollar spent on crude oil buys.
Although there are some who believe that this disparity is a temporary one, there are few indications that the global demand for oil will slow anytime soon. It’s also clear that the jump in the production of shale gas is no short-term phenomenon either
Shale gas will account for 25 percent of the nation’s natural gas supply by the end of this year, up from 2 percent a decade ago, according to the EIA [Energy Information Administration]. And a Pennsylvania State University study released this week reported that Marcellus production, which is still in its infancy, is outpacing last year’s estimates by 30 percent.
Read the complete Philadelphia Inquirer article HERE.