By David Wilson
June 6 (Bloomberg) — Cars, trucks, trains and ships will
increasingly run on natural gas after the fuel’s price broke a
traditional link with crude oil, according to Edward L. Morse,
Citigroup Inc.’s head of global commodities research.
As the CHART OF THE DAY shows, the price of gas for
immediate delivery dropped 32 percent at the Henry Hub in Erath,
Louisiana, since 2010. The hub is the delivery point for futures
contracts traded in New York. Oil has risen 18 percent, based on
the spot price for West Texas Intermediate crude.
“Overwhelming economic incentives” exist to take
advantage of the price break, Morse and seven colleagues wrote
in a report two days ago. Gas costs about 75 percent less than
oil for the same amount of energy, based on the Henry Hub and
West Texas prices yesterday.
The changing relationship between the prices were among
four trends that Morse, based in New York, and colleagues cited
as reasons to anticipate more use of gas in transportation. The
others are accelerating growth in global supplies, governments’
leeway to hold down prices, and environmental benefits when
compared with using oil products.
Switching to gas from oil may reduce the demand for crude
by as much as 1.8 million barrels a day by 2020, according to
the report. This is about 5 percent of what’s now used for
transportation fuel.
“The adoption of natural gas as a fuel could follow an S-
curve,” in which the use accelerates as more consumers make the
transition, the report said. This would follow precedents set in
moves to diesel from gasoline for heavy-duty trucks and to
diesel and electricity from steam for locomotives.
June 6 (Bloomberg) — Cars, trucks, trains and ships will
increasingly run on natural gas after the fuel’s price broke a
traditional link with crude oil, according to Edward L. Morse,
Citigroup Inc.’s head of global commodities research.
As the CHART OF THE DAY shows, the price of gas for
immediate delivery dropped 32 percent at the Henry Hub in Erath,
Louisiana, since 2010. The hub is the delivery point for futures
contracts traded in New York. Oil has risen 18 percent, based on
the spot price for West Texas Intermediate crude.
“Overwhelming economic incentives” exist to take
advantage of the price break, Morse and seven colleagues wrote
in a report two days ago. Gas costs about 75 percent less than
oil for the same amount of energy, based on the Henry Hub and
West Texas prices yesterday.
The changing relationship between the prices were among
four trends that Morse, based in New York, and colleagues cited
as reasons to anticipate more use of gas in transportation. The
others are accelerating growth in global supplies, governments’
leeway to hold down prices, and environmental benefits when
compared with using oil products.
Switching to gas from oil may reduce the demand for crude
by as much as 1.8 million barrels a day by 2020, according to
the report. This is about 5 percent of what’s now used for
transportation fuel.
“The adoption of natural gas as a fuel could follow an S-
curve,” in which the use accelerates as more consumers make the
transition, the report said. This would follow precedents set in
moves to diesel from gasoline for heavy-duty trucks and to
diesel and electricity from steam for locomotives.
For Related News and Information:
North American gas spot price monitor: BGAS <GO>
Worldwide crude spot price monitor: BOIL <GO>
Energy-related top stories: TOP NRG <GO>
Charts, graphs home page: CHART <GO>
–Editors: Michael P. Regan, Lynn Thomasson
To contact the reporter on this story:
David Wilson in New York at +1-212-617-2248 or
dwilson@bloomberg.net
To contact the editor responsible for this story:
Chris Nagi at +1-212-617-2179 or
chrisnagi@bloomberg.net
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