The Energy Equivalence Problem
Oil is priced in $/barrel. Gas is priced in $/MMBtu. How do you compare them? You need an energy-equivalent conversion.
One barrel of oil contains approximately 5.8 MMBtu of thermal energy. This means:
If Brent crude is $96/bbl, the energy-equivalent gas price is $96 / 5.8 = $16.55/MMBtu. If Henry Hub gas is at $3.67/MMBtu, gas is dramatically cheaper than oil on an energy basis.
The 17.2% Rule
Energy experts express parity as a ratio: what percentage of the crude oil price does the gas price represent?
The critical threshold is 17.2%. At this ratio, gas and oil have equal energy cost. Below 17.2%, gas is cheap vs oil. Above 17.2%, gas is expensive vs oil.
Why 17.2%?
It comes from the reciprocal of the energy content: 1/5.8 = 0.172 = 17.2%. This is the point where burning 1 MMBtu of gas costs the same as burning the equivalent amount of oil.
What Happens When Gas Exceeds Parity?
When gas prices stay above 17.2% of crude for extended periods:
- Power utilities in Japan, Pakistan, and Bangladesh switch from LNG to fuel oil or diesel for electricity
- Industrial boilers switch to dual-fuel mode, burning oil instead of gas
- This increases oil demand (pushing oil prices up) and decreases gas demand (pushing gas prices down)
- The mechanism acts as a natural relief valve that rebalances the two markets
Historical Context
In late 2022 and throughout 2025, European TTF gas prices frequently exceeded 20% of Brent, and in extreme cases surged to 60% of Brent — driving massive fuel switching and demand destruction in European industry.
Get Oil-Parity Data via API
curl -H "Authorization: Token YOUR_KEY" \ "https://api.oilpriceapi.com/v1/indicators/fuel-switching" # With TTF as gas benchmark curl -H "Authorization: Token YOUR_KEY" \ "https://api.oilpriceapi.com/v1/indicators/fuel-switching?gas=DUTCH_TTF_NATURAL_GAS_USD" # Returns: ratio_pct, threshold (17.2%), signal, # parity_price, headroom, historical context