" Natural Gas Pricing: Do Oil Prices Still Matter?
Over the past 10 years, however, the number of facilities able to switch between natural gas and residual fuel oil has declined. And in the most recent five years, natural gas prices seemed to move somewhat independently of oil prices. Natural gas prices rose above what was seen as their historical relationship with crude oil prices in 2000, 2002 and 2003. In the first half of 2005, natural gas prices seemed to fall below this historical relationship.
Consequently, many may wonder whether oil price movements still shape those of natural gas and whether the old rules of thumb for relating natural gas prices to those of crude are still useful. The analysis presented here shows oil prices do still matter for natural gas prices, but the old rules of thumb relating natural gas prices to those for oil are of limited usefulness.
With variations in natural gas storage of ±10 percent, a 150 percent gain in the crude oil price could result in the natural gas price rising by less than 65 percent or more than 350 percent. Its no wonder that analysis using rules of thumb to price natural gas suggests that the relationship between natural gas and crude oil prices has changed. In contrast, fitted values from the regression analysis with weekly seasonal factors and storage conditions taken into account show that U.S. natural gas prices track those of WTI quite well (Chart 4 "
WTI = West Texas Intermediate
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State of Connecticut Energy Data
Last modified: March 16, 2005
Last modified: March 16, 2005
1 BARREL = 42 GALLONS
| Energy Type | BTU/BARREL | BTU/GALLON | |
|
CRUDE OIL |
5,855,795 |
139,424 | |
|
MOTOR GASOLINE |
5,250,000 |
125,000 | |
|
AVIATION GASOLINE |
5,005,224 |
119,172 | |
|
JET FUEL |
5,434,926 |
129,403 | |
|
L.P.G. |
4,054,470 |
96,535 | |
|
PROPANE |
3,836,000 |
91,333 | |
|
ETHANE |
3,082,000 |
73,381 | |
|
BUTANE |
4,326,000 |
103,000 | |
|
KEROSENE |
5,670,000 |
135,000 | |
|
#1 DISTILLATE |
5,706,000 |
135,857 | |
|
#2 DISTILLATE |
5,825,000 |
138,690 | |
|
#4 DISTILLATE |
6,062,000 |
144,333 | |
|
RESIDUAL OIL |
6,287,000 |
149,690 |
| BTU/TON | BTU/POUND | ||
|
ANTHRACITE COAL |
25,400,000 |
12,700 | |
|
BITUMINOUS COAL |
23,750,000 |
11,875 | |
| BTU/KWH | |||
|
ELECTRICITY (END-USERS) |
3,412 |
||
|
ELECTRICITY (GENERATION) |
10,908 |
||
| BTU/CUBIC FOOT | |||
|
NATURAL GAS |
1,031 |
