A Major Energy Ratio Has Flipped And Suddenly Natural Gas Looks A Lot More Expensive

boone upside down

Photo: CNN via YouTube

Ever since the recent financial crisis bottomed, oil prices have shot upward while natural gas prices have collapsed.This has caused the widely watch oil/natural gas ratio to surge.

In recent weeks, however, that spread has dramatically reversed: crude prices have plummeted while natgas has rallied — the former on the economy, the latter on production cuts.

Just today, crude contracts dipped below $79 for the first time since December. 

Here’s the story in chart form:

oil natgas spread

Photo: Bespoke Investment Group

Why this matters is pretty straightforward: If we’re sure we want to switch over all our utilities to cheaper and cleaner-burning natural gas (ala the Pickens Plan), this does not help.

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