Oil and gas correlation - Research Paper Example

Oil and Gas correlation Oil and gas are substitute sources of energy are therefore plays a significant role in the globaleconomic development. It would therefore be very important to explain the existing relationship between their prices in the global market. The increasing pressure of globalization explains the observed changes in the correlation between these two prime commodities. The world politics and socio-economic changes are important in determining the trend in consumption of the two commodities (Victor 445).

This includes the dollar value. It is important to note that in the past, prices of oil and gas has always moved in the same direction but this trend has sometimes indicated a reverse situation. It would therefore be important to explain why and the possible reveres resolution (Ross 42).There has been an increased shift towards use of gas in production of domestic electricity against the small oil use. This factor explains the increasing trend of negative correlation between the two commodities as noted from late 1970s (Roberts 51).

It is also evident that from 1991, the import of oil by US had reduced but this still represented approximately 40% of the consumption by US against a paltry 5% of gas consumption by the US (Yépez-Garcia, Rigoberto , and Julie 86). This is an evident case to support the observed negative correlation. The increasing local production of gas by US in 1980s led to the increased supply of gas which affected prices locally and internationally but exhibited consistent trend towards a positive correlation with oil prices (Yépez-Garcia, Rigoberto , and Julie 86) .

Increased technological advancement which has seen a rise in gas fuelled cars is likely to push the gas prices up. This would initiate the positive correlation between the two commodities. It is also predicted that increased export of LNG by US to the global market will promote the chances of gas offering competition to oil thereby moving in the same direction in terms of prices (Cretì 61). Work citedCretì, Anna. The Economics of Natural Gas Storage: A European Perspective. Berlin: Springer, 2009. Print.Roberts, Paul.

The End of Oil: On the Edge of a Perilous New World. Boston, Mass. [u.a.: Houghton Mifflin, 2005. Print.Ross, Michael L. The Oil Curse: How Petroleum Wealth Shapes the Development of Nations. Princeton, N.J: Princeton University Press, 2012. Internet resource.Speight, James G. Shale Gas Production Processes. S.l.: Gulf Professional, 2013. Internet resource.The Future of the Natural Gas Market in South East Europe. Washington, D.C: World Bank, 2009. Print.Victor, David G. Natural Gas and Geopolitics: From 1970 to 2040.

Cambridge [u.a.: Cambridge Univ. Press, 2007. Print.