Whenever natural gas is extracted in the oil and gas industry, it is either wet or dry. The difference between wet and dry natural gas is that dry natural gas is at least eighty-five percent methane or more. Wet natural gas consists of some methane and other liquid features like butane, ethane, or propane. Essentially, the more methane present in natural gas, the dryer it is considered.
When taking a closer look at how dry gas is extracted compared to wet gas, the cost for retrieving dry gas tends to come at a higher price. The cost is elevated due to the use of more advanced metallurgy and equipment. Ferrari Energy, a private, family-owned oil and gas company that offers mineral and leasehold acquisitions services is familiar with the debate around dry gas extractions. Below, experts at Ferrari Energy debunk myths related to gas and oil extraction costs and provide facts explaining whether or not gas and oil extraction prices are that much different.
Commonalities Between Natural Gas and Crude Oil
A common feature that natural gas and crude oil share is that they both are energy commodities. These fossil fuels are utilized to power society’s energy needs like transportation or heating and cooling homes. The prices of natural gas and oil relate as they are an inter-commodity spread. That means that the cost of these two energy resources changes in relation to one another. When looking at the history of cost fluctuation between the two, when one of the two raises in price, the latter elevates in consumer demand due to the nature of a lower price along with increased supply.
When it comes to the businesses in the oil and gas industry, it is common for companies to produce both crude oil and natural gas. Oil and gas exploration usually goes hand in hand with production as the oil drilling process often involves natural gas’ release and capture. After more natural gas reserves were discovered in the United States, the connection between natural gas and crude oil prices changed. Massive gas reserves found in the United States’ Marcellus and Utica shale regions resulted in a price decrease of natural gas while, at the same time, oil prices proceeded to elevate from 2000 to 2014.
Towards the end of 2014 and into 2016, the cost of crude oil reduced immensely due to the economy’s decelerated growth and less demand for oil. However, by 2018, the oil price climbed again until the coronavirus pandemic altered the global economy and society, putting a pause on oil demand. The pandemic forced a drastic fall in the cost of crude oil, so much so that the prices reached historic lows. On the other end, natural gas decreased a bit but mainly stayed at a consistent price.
When comparing the refining process of crude oil and natural gas, the difference in their molecular makeup makes crude oil’s refining process a bit more profound compared to natural gas in preparation for commercial use.