Language Matters (blog): The Decoupling of Oil and Gas Prices (Peter McKenzie-Brown on December 27, 2007)

Energy forms are not created equal. Gasoline and diesel are great fuels for transportation, and at the moment there are few viable alternatives. Coal, on the other hand, is just dandy for generating electricity and smelting metals. Natural gas is terrific for space heating, powering electricity-generating turbines and manufacturing fertilizer and petrochemicals.

Because of their different applications and their different energy densities, hydrocarbons have different relative prices. And until recently, they were priced in a band which reflected their relative values. That band is now falling apart. Perhaps this is a sign of things to come - but not before the market experiences what commodity traders call a "short squeeze".

Seeking Alpha: Oil and Natural Gas Will Decouple - Big Time (Greg Pinelli on February 22, 2008)

Oil and Natural Gas are typically welded at the investment hip. They often occur simultaneously in developed fields and are lumped together in much the same way as physical gold and silver - ratios of one to the other are viewed historically and investibility in either looks attractive when those ratios are either high or low.

I'm going to offer an alternative view. Consider oil and natural gas as different bridges, of limited life-spans, to the future. Oil's bridge was built generations ago. It lifted early industrial, fuel powered societies thru an assisted muscle powered age to a decidedly unmuscled technological age. While there are still decades of diminishing supply left it is the fuel of the past. Literally, that bridge has been crossed. Natural gas will, of necessity, carry us over a shorter time span to the next energy bridges, most likely some version of much cleaner coal, nuclear power, and wind/solar power. Even those future generation sources will not be final answers, but in investing, final answers are not necessary. Only profitable ones.

Now maybe the energy experts can comment.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes