Why is Oil Sold at a Premium to Natural Gas?
Wednesday, November 18, 2009 at 11:01PM Why is Oil Sold at a Premium to Natural Gas?
By Kim Chambers
Although energy stocks are broadly all linked as a single commodity, the reality is that the different means of developing power for people's homes are very separate. The difference between oil and gas is perhaps one of the most obvious examples of how two fuel sources have not yet reached parity.
Natural gas, for now, is the inferior little brother of oil. Oil is a global commodity, whereas natural gas is only a regional commodity. What that means is that oil prices are generally quite stable worldwide, whereas gas prices can vary hugely from country to country depending on who is supplying it.
The main reason for these price discrepancies is transportation. Transporting gas is a niche market at the moment and anything that is in limited supply is extremely expensive. Oil tankers are readily available and are the established method of transportation method for fuel. Oil has the advantage over gas of an historical infrastructure, which keeps costs down.
On the other hand, gas is the better of the two fuels. Natural gas has the advantage of being cleaner to burn, creating less carbon emissions, and there is no risk of disastrous spills, as there is with oil. However, gas is expensive to get from one side of the world to the other, and that's what makes it unworkable.
In the Middle East, both oil and gas are abundant. As gas has no real market value to the major world producers of oil though, it is used to drive more oil through the wells. Natural gas is pumped underground to raise the oil levels which make them easier to extract. Without the ability to easily transport the abundant gas to where it is needed, the oil producers have no need for gas as a fuel source.
As new techniques for gas delivery are made on a global scale though, gas could emerge as more dominant and less of a regional source of energy. Liquefied Natural Gas (LNG) is a part of the solution, which temporarily transforms gas into a liquid that not only takes up less space but is also easier for suppliers to handle in transportation. As gas becomes a more readily transportable commodity, parity between gas and oil may finally be reached. Experts expect it to be at least a decade however, before gas can catch up with the might of the oil companies.
Kim has done a lot of research into price comparisons for customers and how to get the best deal on many household products including Gas and Electricity. She enjoys writing articles to share this knowledge.
Article Source: http://EzineArticles.com/?expert=Kim_Chambers
http://EzineArticles.com/?Why-is-Oil-Sold-at-a-Premium-to-Natural-Gas?&id=3281833
NOTICE - This article is the opinion of the author or reports the news and opinions of others and is NOT INTENDED TO OFFER ADVICE. This story/article/feature may be an opinion piece — and should be treated accordingly — or reporting on the opinions of others, and should never be considered as a sole source of information or as a suggestion, instruction or prescription. For crime stories, always read the word "allegedly" in any story mentioning "suspects" or "persons of interest". For money/trade and exchange stories, this magazine and its writers accept no responsibility for accuracy — always check with other sources for important decisions. In the case of food/health stories, these facts have not been evaluated by the United States Food and Drug Administration (FDA). Information stated here should be NOT be considered as medical, health, psychological or behavior advice. All information in this story and on this site is provided for educational or entertainment purposes ONLY. Always seek the advice of experts, including doctors for medical opinions. Only a licensed medical doctor can offer medical advice. Legal advice or other expert advice is best referred to experts in their respective fields. The publishers and editors, authors, researchers, employees, heirs and assigns accept no responsibility whatsoever for any advice, facts, opinions in this story, nor for resulting actions of readers of this information. ALL READERS ACCEPT THAT THIS INFORMATION IS PRESENTED ONLY AS EDUCATION, ENTERTAINMENT OR OPINION/INFORMATION AND AGREE IN READING THIS STORY OR THIS SITE THAT USE OF THIS INFORMATION IS SOLELY THE RESPONSIBILITY OF THE READER. Copyright by the author unless otherwise indicated. EXCERPTS from other magazines or media sources are posted under fair use doctrine, on the basis of no more than 5-10% of content with links and credit to source for the complete story. These are posted in the interest of providing interesting links (description as excerpt) with navigation to the source. Likewise, we encourage our many subscribers to excerpt with credit and links to our e-zines, up to 10% of content. To use more content than 10%, please contact the e-zine for permission. ALL RIGHTS RESERVED except as stipulated herein.
Persona Corp. and Blogertize publishes several e-zines for entertainment and information, but cautions readers to read the NOTICE above:
• Advance Magazine
* Secure Network News
Sponsored Advertisers
Jameson Bank – Canada's "It's Taken Care Of" Bank
Amer.com – Technology for Life
Reader Comments