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The Relationship of Natural Gas to Oil Prices

Peter R. Hartley, Kenneth B Medlock III and Jennifer E. Rosthal

Year: 2008
Volume: Volume 29
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No3-3
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Abstract:
We investigate the relationship between the prices of natural gas and crude oil, and the factors that cause short run departures from the long run equilibrium price relationship. We find evidence that the link between natural gas and crude oil prices is indirect, acting through competition at the margin between natural gas and residual fuel oil. We also find that technology is critical to the long run relationship between fuel prices, and short run departures from long run equilibrium are influenced by product inventories, weather, other seasonal factors and supply shocks such as hurricanes.





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