Chart of the Day: Natural Gas vs. Oil
Here's an update of a chart I've featured before comparing prices for oil and natural gas on an energy equivalent basis. To compare oil and gas prices on an equivalent basis, natural gas prices are increased by a factor of 5.8, since one barrel of oil = 5,800,000 BTUs, and natural gas is priced in dollars per million BTUs. With natural gas selling for about $2.30 per million BTUs, its energy equivalent price for a barrel of oil would be $13.34, or 87% below the price of WTI oil at $104.71. When measured on an energy equivalent basis, natural gas has never been cheaper than oil than it is today. Related: Forbes reports that major oil and gas companies Chevron and Exxon Mobil will continue drilling for natural gas, even with record low prices, with Chevron planning to double its production in the Marcellus region: "Despite low natural gas prices, Chevron looks intent on pushing into the natural gas market in the U.S. The company plans to double its drilling in the Marcellus play this year while also drilling a few exploration wells in the Utica play despite gas prices touching their lowest point in a decade, making shale exploration less profitable. Chevron’s decision to press on with shale exploration mirrors that of rival Exxon Mobil, which has decided against production cuts."In that case, we can expect natural gas prices to remain low.