Analyst Harry Chernoff writes: ” nothing has changed the bleak long-term outlook for North American natural gas supply against the relentless increases in demand from the residential, commercial, and electric power sectors. While double-digit gas prices will undoubtedly force significant amounts of industrial demand offshore, the other three sectors will be there to pick up the slack over time. The effect of potential increases in imported LNG several years from now is an open question.
“The bottom line: Assuming no radical changes in North American and international economic growth rates or OPEC pricing and supply policies, oil prices should remain high and gas prices, now at parity with oil prices, should also remain high. Whether the oil/gas price ratio stabilizes at 6.7:1 or drifts towards 8:1 depends on the weather and the level of industrial demand over the next few months. If the weather remains warmer than average, gas prices will decline relative to oil, possibly another 20%. On the other hand, even an 8:1 oil/gas price ratio doesn’t offer much relief to U.S. consumers if the price of oil stabilizes above $60/bbl.”