Gas More Expensive Than Oil Sets Stage for Asian Fuel Switching

(Bloomberg) -- A rally in liquefied natural gas has pushed Asian prices to a rare and substantial premium over oil, paving the way for major consumers to shift to cheaper but dirtier fuels.

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Japan-Korea marker prices for LNG, the Asian benchmark, were as much as 22% more expensive than Brent crude earlier this month on an energy-equivalent basis, according to Bloomberg calculations. Gas prices have risen on cold winter weather in the Northern Hemisphere and the loss of Russian pipeline flows via Ukraine, increasing competition between European and Asian buyers.

Conditions appear ripe for electricity generators and big industrial consumers to switch from gas to oil products. Many Asian power plants sometimes run on fuel oil, while it’s also possible to use diesel-type fuels for industry, heating and transport.

--With assistance from Nicholas Lua.

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