Image: Real Clear Energy
[Vaclav] Smil selected the above figures, which chart the divergence between natural gas and oil prices over the last four years. “[There are] too many choices possible,” he told the Post, “but here is one epoch-making trend: as the post-2008 rise of hydraulic fracturing drove U.S. natural gas prices down and increased the supply (in 2013 the U.S. will be again the world’s largest natural gas producer) oil and gas prices, traditionally moving in tandem, have diverged significantly. History is being made.” The price divergence has sparked signs of a manufacturing revival in the United States and spurred efforts to substitute gas for gasoline and diesel fuel in cars and trucks. The trend is indeed driving historical changes _ http://www.realclearenergy.org/charticles/2013/12/30/vaclav_smils_graph_of_the_year_107438.html
Vaclav Smil is a Canadian academic who is well known for his analyses of energy trends. If he thinks the oil price : gas price divergence is an important energy trend of the year, brighter people should pay attention.
More important than the substitution of gas for gasoline and diesel fuel in cars and trucks, is the movement toward “gas to liquid fuels” processes, and “gas to industrial chemicals” processes. These trends will significantly reduce demand for oil in transportation, agriculture, and industry.
The ultimate death of “peak oil doomerism” will occur once new generations of very high temperature nuclear reactors are produced cheaply and reliably in mass production factory settings. Cheap production heat from these nuclear reactors will make viable a wide range of new processes for turning cheap natural gas (and coal, bitumens, kerogens, gas hydrates, etc) into more expensive fuels, fertilisers, plastics, lubricants, industrial chemicals, and other materials.
Al Fin has been following the divergence between gas prices and oil prices for a number of years now. Market forces will continue to drive this divergence as long as they are allowed to work. The economic and energy repercussions of this trend are likely to be significant, unless bad government policies of the green lefty-Luddite dieoff.orgy variety are implemented by incompetent governments in Europe and the Anglosphere.
From Al Fin Energy:
“Fiscal breakeven” is a different concept than “production costs,” and applies to the viability of governments that are largely financed by oil & gas revenues — such as Venezuela, Russia, Iran, the Arab Gulf states, etc. For example, Saudi Arabia is doing very well in terms of production costs, but because of its generous welfare disbursements it runs the risk of falling below fiscal breakeven if oil prices drop significantly.