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Business & Economics :: Economic Indicators

March 16, 2012

Price ratio of oil to natural gas increases to record level, ACC says

Scott Jenkins

The ratio of oil prices to natural gas prices rose to 50.7 to 1 this week, higher than the 48.8 to 1 level from last week, according to data from the Energy Information Administration (EIA; Washington, D.C.; that were cited in the latest Weekly Chemistry and Economic Report from the American Chemistry Council (ACC; Washington, D.C.;
“As far as we can tell,” ACC wrote, “this is a record comparison.” The ACC report explains that, as a rule of thumb, when the oil-to-natural gas price ratio is greater than seven, the competitiveness of U.S. Gulf Coast-based petrochemicals and derivatives, compared to other major petroleum-producing regions, is enhanced.
EIA data indicate that the ratio has been above seven for several years. In the U.S., the ACC notes, nearly 90% of ethylene is derived from natural gas liquids, while in Western Europe, 85% of ethylene is derived from naphtha, gas oil and other light distillate oil-based products.
ACC also included information from the Organization for Economic Cooperation and Development’s (OECD) composite leading indicator (CLI) for January. The CLI indicates that the “U.S. and Japan continue to drive the overall position, but stronger, albeit tentative, signals are beginning to emerge within all other major OECD economies and the Euro area as a whole,” ACC says.
CLIs for India and Russia are showing stronger signs of a positive change in economic growth momentum, ACC adds, but CLIs for China and Brazil “continue to point to below-trend growth” in economic activity. The OECD CLIs are good indicators for basic and specialty chemicals.
In its summary of the week’s economic reports, the ACC said data were mostly positive, as the job market improves and households feel more confident about the recovery.

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