Crude Oil versus Natural Gas?
H There!
I just read an investment analysis which stated:
either natural gas is going up or oil is coming down.
The argument:
1. Historically, crude oil is 10X more expensive than natural gas.
2. Right now, crude oil is 17X more expensive than natural gas.
3. Oil contains 6X the btu energy of natural gas.
4. Given the physics involved, this 6X ratio never changes regardless
of market prices.
Therefore, either natural gas is going up or oil is coming down.
Or both!
What do you think? Is this analysis correct?
Many thanks in advance!
Ron
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March 20th, 2010 at 3:16 pm
A little bit of both. But mainly I think oil is going down. Oil is a lot more speculative than natural gas. The demand for oil doesnt justify there current price and physical traders are playing the spot price off of the futures price.
March 20th, 2010 at 3:16 pm
In a free market the prices would remain more constant but…. we have OPEC wanting $75 per barrel and we have a lot of natural gas being discovered all over. China is starting to recover now driving demand for crude up. The US recovery is still suspect with unemployment likely to go up to 13% so demand might remain low.
I see natural gas bumping along or rising slightly with crude staying in about a $10 range. Overall some fluctuations but not much change in the end.
March 20th, 2010 at 3:16 pm
The U.S. has about 100 years of supply of nat gas. And we import most of our oil. Supply imbalance is certainly different from the historical metrics you mentioned above. So hard to make parrallels when the world is so different than 15 years ago
March 20th, 2010 at 3:16 pm
NSG.compressed liquid gas is being used more and more the world over for vehicles.Crude is being found everywhere.It’s going to be too cheap.
All these efforts to make electrical and hybrid vehicles will have no meaning,very soon.
Middle east countries have not diversified their source of income.They will be desperate to sell crude in no time.