Investors like to examine pricing anomalies, particularly related to commodities that could be viewed as substitutes but trade at radically different prices. One barrel of crude oil has approximately six times the energy content of one thousand cubic feet (mcf) of natural gas. One mcf of natural gas is approximately equivalent to one million BTUs (MBTU). Despite the energy equivalence, for a variety of reasons, the pricing relationship between oil and natural gas is almost never exactly six to one. Read this article for our analysis.
Earlier this week, Qatar Airways made history by operating the first ever commercial flight using a fuel partially derived from natural gas. The flight from London to Doha used a mixture of 50% conventional jet fuel and 50% synthetic kerosene made by converting natural gas to liquid form. Qatar is awash in natural gas and seeking ways to put this natural resource to good use. This situation is a very good example of the substitution effect in economics and worthy of discussion. Read this article for more details.