Oil and gas prices no longer connected

The Financial Times recently ran a piece by one of its Alphaville reporters, showing a chart produced by Reuters, and used by Reuters, energy market consultant Nick Campbell at Inenco:

The interesting point about the chart was that UK gas prices were no longer linked to oil prices.

Historically, UK gas prices have apparently been linked to the long term price of crude. This can be seen in the period from the start of the chart to Q1 2009. But as the chart clearly shows, since some time around May to August 2009 this has no longer been the case.

We are now entering a phase where oil and gas are seen for what they are — two separate resources, with two separate markets of supply and demand.

What the chart shows to me is that since Q1 2009 oil prices have been rising, while prices for gas have been falling.

To me this is consistent with our having reached (or reaching) a peak in oil production, while reserves and production of gas can continue to grow — for a while yet.


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