SEARCH BLOG: OIL and NATURAL GAS
It has been obvious that something is wrong. Oil prices stay high; natural gas prices plummet.
[image source] Significant shale gas reserves exist in Poland and France. With new and clear guidelines, development could be rapid and sharply reduce Europe’s import needs. At the same time, the US is beginning to plan for exports of gas. This is the context behind last week’s remarkable comment by Vladimir Putin, who warned Gazprom it would have to rise to the challenge of a transformed market.
But shale gas is not the full story. US production of tight oil, which is produced from shale and other rocks, has tripled in the past three years to almost 900,000 b/d. Predictions that the US could become self-sufficient in hydrocarbons in the next two decades no longer look absurd. [source]Well, in the U.S., natural gas is abundantly available; oil isn't. Natural gas production is either unprofitable or getting there. There is enough market tension for oil that $100 oil looks to stay around for awhile... and oil profitability as well.
Except, of course, the producers respond to the market. From economist Mark Perry:
This is to be expected. Fracking and shale are relatively new sources with chaotic growth. There will be corrections and adjustments. The chart above says we should expect a rise in the price of natural gas and, possibly, a decline in the price of oil as their relative abundance changes. Unless, of course, we don't.