The oil-to-gas price ratio has hit its highest point in six years. There’s no doubt about it, the market is certainly going through a change. Recently, the level of oil-to-gas ratio reached 30-to-1 and is expected to increase further. With this ratio, analysts are expecting the average price of gas to drop for the second consecutive year. This would lead to gas prices being the lowest that they’ve been in over 20 years.
Why is this the case? Well, the reality is that most U.S. drillers are not searching for gas. Now, drillers are seeking out more valuable oils and natural gas liquids. When drillers seek out these types of liquids and oils, they wind up finding gas inherently. Because of that, major oil corporations aren’t hurt by the dip in gas prices.
These oil-to-gas ratios are at the highest that we’ve seen since 2013. Since then, the average ratio that we’ve seen for oil-to-gas is 19-to-1. This ratio has changed drastically because of the rise in oil prices and the drop in gas prices. Ultimately, this is what has held the gas industry back.
Analysts have been looking over the market as these changes in cost happen, and they predict these numbers to dip even lower in the year to come. In fact, analysts project that the average will drop down to $2.31 billion dollars in 2020. This average is the lowest that it’s been since 1999.