Perhaps the most commonly utilized fossil fuel on the planet is both natural gas and oil. But what exactly determines the cost of these greatest two fossil fuels of all time? How can we gauge the price difference between both treasured resources?
For starters, the cost of natural gas vs oil is dependent on the demand, generation and distribution of these two resources. Currently, the demand for oil as a vehicular fuel source – everything ranging from aircrafts to automobiles – has increased substantially over the past few decades due to the boost in living standards and burgeoning global population. Natural gas on the other hand, remains as a main heating source for private residences in the United States during icy cold winter months.
But it is the generation and distribution of both these coveted resources that greatly affects its cost. Oil production generally requires pricey explorations and drilling projects to tap into hidden oil resources in deep seas. Oil also requires fractionation and refinement – two vital processes that need greater skilled manpower as well as time and equipment. On another note, refinement is not essential in producing natural gas, and this reduces its cost as compared to oil. However, present natural gas acquirement techniques such as horizontal drilling and hydraulic fracturing in the United States has increased the price of generating natural gas compared to the past.
The Energy Information Administration has chartered a price difference of $756 between natural gas heating and heating oil in private residences, whereby the former averaged $866 whilst the latter depicted $1622 in usage during the winter season in the United States. This shows that the price of heating oil is easily double the cost of natural gas heating. Of course, the cost of natural gas vs oil must also be evaluated on present factors. The discovery of oil sands that can be refined into a fuel source has altered the pricing trends of the fossil fuel market. Since oil sands lay close to the surface, this greatly nullifies production costs and can potentially cause a dip in oil prices in the future.
Thus, the cost of natural gas vs oil is highly dependent on a variety of factors that can interchange with time. This makes the price difference between both resources realign in tandem, especially after the unearthing of oil sands as a future marketable resource.