The impact on U.S. natural gas prices, on the other hand, is more limited as the correlation is close to zero. This low correlation is partly because the U.S. is itself a net exporter of natural gas. It’s also because of the segmented nature of gas markets. Gas is harder to transport and store—it must be transported via pipelines and stored in special facilities, or it must be liquefied before transportation.
Oil, by contrast, is a more tradable good than gas—it can be put in a barrel and shipped anywhere.
Still, there can be some smaller knock-on effects from gas prices to oil prices and to other forms of energy, such as coal. This arises because firms and households that are able to substitute away from more expensive fuels to cheaper ones will do so. That increased demand will, in turn, push up crude, diesel, and petrol prices from already-elevated levels and add to the pressure on the U.S. economy.
Restrictions on the flow of Russian gas to Europe are likely to be bad news for energy prices and threaten to tip the already-weakening EU economy into recession. The effects will be felt in global energy markets, particularly in Europe, including the U.K., and also in Asia. While U.S. gas prices are largely insulated, U.S. oil prices may not be.
There may be even more challenging times ahead. It’s more reason for long-term investors to have a strategic mindset—to remain focused on their goals and on what they can control, such as costs, and to stay disciplined and diversified.
Lulu Al Ghussein contributed to this article.