Letter from the US: Is oil barreling down the gas highway?

The oil markets may be poised to experience a price slump mirroring the history of the gas sector

Natural gas is ‘dirt cheap’ in the US. At the time of writing, Henry Hub spot prices were around $2.3–2.4/m Btu, which is the oil equivalent of around $15–18/bl. In fact, gas prices have been low for years (see Fig.1). The rock-bottom prices have not prevented firms from drilling, however. The efficiencies in gas production and the presence of more lucrative co-products (namely oil) have prompted firms to maintain their activities. In late September, several executives asserted that gas production would rise substantially if the Biden administration removed its restrictions. The gas price contrasts markedly with that of oil, which is hovering around $70/bl. Company executives, analysts and o