This paper examines the relationship between crude oil and natural gas prices. The prices of natural gas and crude behave much as any other commodity experiencing wide price swings in times of shortage or oversupply. The paper tests data from 1985-2000 using regression analysis to substantiate the relationship between the two commodities and further throws light on the reasons for deviation of natural gas prices from crude oil prices…
Download file to see previous pages...
Observing the pattern of crude oil and natural gas prices generally supports the economic theory and leads to the belief that both commodities do share a relationship. However, over the past few years, a decoupling of natural gas prices from crude oil prices has been observed (refer to graph 1.1 in appendix). This has led concerns over the strength of the relationship between crude and natural gas prices.
Economic factors link crude oil and natural gas prices through supply and demand. There has been a strong conviction regarding the one-way relationship between the prices of crude oil and natural gas, whereby changes in crude figures influence natural gas prices and any changes in natural gas prices have no impact on crude. This is due to the relative size of each market. Prices of crude are determined on the world market whereas natural gas valuation takes place in regionally segmented markets. As a result, any adverse event or condition is unlikely to affect the global price of oil (Villar, Joutz)
This paper attempts to signify the economic and statistical relationship between crude oil and natural gas prices. The period under review is from 1985 to 2005. ...
Overview of Natural Gas Industry
The structure of the natural gas industry has changed dramatically over the last 15 years. In the past, the structure of this industry was simple, with limited flexibility and few options for gas delivery. Exploration and production companies explored and drilled for natural gas, selling the product to transportation pipelines. These pipelines transported the natural gas, selling it to local distribution utilities, who in turn sold the product to its customers. Pricing at the exploration, production and transportation level was federally regulated whereas state regulation monitored the price at which local distribution companies sold natural gas to customers (naturalgas.org).
Prior to deregulation, the structure of the natural gas industry was very straightforward, however, it suffered from shortages in the 1970s and surpluses in the 1980s. Since deregulation, the industry is much more open to competition and choice. Prices are no longer regulated and are determined by the demand-supply forces. One of the notable differences in the revised structure of the natural gas industry is the existence of natural gas marketers. They serve to facilitate the movement of natural gas from the producers to the end users. Marketers may either own the natural gas being transferred, or simply act as facilitators for the transportation.
Source : NGSA
The diagram above shows the pathway of natural gas from producer to end user in a regulated environment. The diagram below shows the pathway in a deregulated environment where marketers exist and can sell directly to end users.
Source : NGSA
Price of natural gas is simply a function of demand and supply. When demand for gas rises,
...Download file to see next pagesRead More
Cite this document
(“Relationship Between Crude Oil And Natural Gas Prices Essay”, n.d.)
Retrieved de https://studentshare.org/miscellaneous/1515080-relationship-between-crude-oil-and-natural-gas-prices
(Relationship Between Crude Oil And Natural Gas Prices Essay)
“Relationship Between Crude Oil And Natural Gas Prices Essay”, n.d. https://studentshare.org/miscellaneous/1515080-relationship-between-crude-oil-and-natural-gas-prices.
Why are Gas Prices Inflated? There are numerous theories doing the rounds every time there is an increase in the price of gas. Increase in prices of gas is inevitably followed by economic instability with direct impact on inflation. In the 90’s the West Texas Intermediate (WTI) crude oil was priced at 20 dollars a barrel.
The researcher of this essay presents the actions of a succesful manager seeking the most profit for company specializing in oil products. For example, a manager can hold back supply in times when there is a need to set higher oil prices or oil products can be held back in order to prevent flooding the market with excessive oil supply.
The present study is to find out the causes for the disproportionate escalation of the price of gasoline than the price per barrel of crude oil and its effects on consumers.
The aim of selecting any business research method is to give most useful information to the key decision-makers in a most practical and cost-effective way.
The prices of light, low-sulphur grades like American WTI and North Sea Brent grades have at times, risen much faster than those of so-called heavy crude grades that contain sulphur content. For Example, the price of Russian Urals Blend, a heavy grade has occasionally been almost 7 dollars lower per barrel than Brent.
The global economy is rising at a very fast pace and any corrective action by central banks or Government is not likely to have a perceptible effect if recession sets in. The dependence of the economy on oil has reduced considerably with the strengthening of the IT and services sectors.
(U.S. Dept. of Energy, 2008) Due to the limited supply of oil and natural gas, Pakistan remains highly dependent on the importation of crude oil from other countries.
Pakistan government is very much alarmed with the necessary improvements
Largely, market prices of gasoline products change whenever crude oil prices change. Policy makers in the oil industry are aware of the influence of this relationship. This paper explores the relationship that exists between the crude oil and the gasoline
From the developed to the developing nations, its impact has been extensive, impacting on the economic, to the political, and to the socio-cultural lives of the people. It has also had a major impact on the volatility of oil and
The protection of the environment due to oil and gas mining is well regulated in developed energy mining countries. There are strict environmental standards that have been directed to the energy mining industries in the developed
17 Pages(4250 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic Relationship Between Crude Oil And Natural Gas Prices for FREE!