Gas Reaches Record High as Gas Hits Record Low
On an annual basis, retail gasoline prices hit an all-time high in 2011. The average price for all grades was $3.576 per gallon, vs $3.299 in 2008.
Meanwhile, the shale gas revolution has set the stage for declining prices per mmbtu of natural gas.
Natural gas spot prices. Source: http://www.eia.gov.
The chart above shows the price of natural gas per million BTU delivered to the Henry Hub, a large pipeline interconnection point in Louisiana. The current ratio of oil price per barrel to gas price per mmbtu is about 33:1 ($100/bbl to $3.00/mmbtu), a historically low value. The energy equivalency is about 6:1.
Before the impact of the shale boom, a normal ratio was about 10:1. On rare occasion, the ratio has been below 6:1 for brief times.
Transportation and distribution add significantly to the price of gas at the retail level, but even there the gas price is about a 40% discount to oil on the basis of energy content.
Cross-posted at stevemaley.com.