Natural gas: Natural gas has decoupled from oil in a big way. The two fuels aren't exactly interchangeable, but their prices have traditionally moved pretty much in tandem. In 2009, though, the divergence has been dramatic. The price of oil has almost doubled, while natural gas is down by almost 40 per cent.
Oil may not be as scarce as the price increase would suggest, but there is clearly an oversupply in gas. The recession has cut into demand from power generation — the main use for natural gas. But supply has also increased, thanks largely to new extraction technology and the proliferation of huge liquefied natural gas projects. The International Energy Agency predicts the glut will last at least until 2015.
Of course, a cold winter might alter the dynamics. But it looks like the many experts who expected the market to absorb as much gas as the world could produce were too optimistic. Wherever the gas price is set in an open market -- in much of Europe and Asia gas it is usually indexed to oil -- the price pressure is set to continue.
Still, in the long run the oil-gas gap should narrow. The longer gas stays cheap, the greater the incentive to find new uses.
Transport is a large market, but a tank of gas has much less energy than a tank of petrol. Gas-to-liquids technology, which converts natural gas into petroleum products such as diesel fuel, could close some of the gap. So vehicles could be powered by gas-generated electricity, if engineers find a way to make batteries more efficient.
The biggest demand pull might come not from technology but from regulation. Gas can relatively easily replace coal in power generation and is half as carbon-intensive. As long as man-made global warming is considered a threat, there will be pressure to find cheap ways to reduce carbon emissions.
Most power plants under construction and planned in OECD countries are gas-fired, according to the IEA. The U.S. coal lobby won't be happy, but gas still looks like the fossil-fuel of the future.
