Lifting the price

摘要

The traditional premium paid for oil over natural gas has gained ground in the US over the past decade. Figure 1 compares the ratio of spot gas to oil prices from 2001 until mid-2010. Historically, US gas prices were coupled to oil prices only by market competition for their relative calorific value. The heating value of 6,000 cf of natural gas is equivalent to the heating value of 1 barrel of oil. Matching the calorific values of gas and oil at parity sets their calorific price parity ratio at 1:6, or 0.17.