The world oil economy

Natural gas in North America broke below the $2.00 barrier today, for the first time in ten years. It’s important to remember that, unlike oil, natural gas does not trade at a converged, global price. Accordingly, a million BTU in LNG form currently trades for over $9.00 in the UK, and over $15.00 in Japan. Such low prices for natural gas unquestionably give the US a competitive advantage. But, it will take a resurgence in manufacturing and related industrialism to full capture the price disparity. After all, the US is still very much an oil-based economy.
That said, energy transition will indeed continue–and even accelerate. It is simply unavoidable that any physical process, which could be switched to natural gas from oil, will be overlooked in this economy. Given that the world oil economy is contending with prices for a million BTU in the $17.00 to $20.00 range, we should begin to see an arbitrage that captures the N.A. natural gas advantage at $2.00 per million BTU. How appropriate therefore that the Oil and Gas industry itself should get the ball rolling, in this regard. See this Reuters story – Drillers dropping diesel for cheaper natural gas:
North American oil and gas companies are trying to take the sting out of low natural gas prices by using it instead of costlier diesel fuel to drive their drilling rigs… Apache Corp, the largest U.S. company focused solely on oil and gas exploration and production, is in the process of converting its first rig to run on power generated by liquefied natural gas (LNG). Canada’s Encana Corp’s already has 15 of its more than 40 rigs driven by gas, and plans to convert even more.
I’ve written extensively about the long, and economically painful process of energy transition but it now seems likely that the first five years of such a disruptive transition is now behind us. In the next phase, a longer period which should take at least another 10-15 years, we will see oil cede its primacy first to coal. This hand-off from oil to coal is already very much underway. Natural gas will then start to compete against coal more forcefully by mid-decade, and then later in the decade the fast rate of growth in renewables–taking place from low levels in the background–will break out to the upside and gain significant share of global primary energy supply.