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The stealth factor behind oil's decline

Crude oil is in a bear market and by now most investors know the narrative. Depending on who you ask and what their biases are, many conclude that Saudi Arabia may be intentionally trying to send crude oil down to defend its market share and its regional hegemony while also putting wildcatters in Texas and North Dakota out of business.

Trucks at natural gas filling station
Natural Gas Vehicles for America
Trucks at natural gas filling station

U.S. oil production has nearly doubled over the last five years to about nine million barrels per day. The price of U.S. benchmark crude has plunged to $61 a barrel, off 43 percent from its $107 peak last June. We haven't seen such prices since mid-2009, less than a year after Lehman Brothers went under.

Read More$60 oil for the next five years: Economist

Slowing global growth is adding to oil's slump. China was once the global economic engine but now the world's second largest oil importer is posting iffy economic results. It was reporting 11+ percent GDP increases in 2007 but now it is limping in, at least by Chinese standards. GDP growth is down to 7.3 percent, with many analysts penciling in figures south of that. No surprise, then, that 3-year annualized Chinese oil import growth fell to 4.3 percent last year from 7.5 percent the year before, according to the U.S. Energy Information Administration.

The U.S. offers a contrast, with evidence of improvement in housing and labor markets demonstrating relative economic prosperity. Nevertheless, technological progress in fuel economy and alternative energy has pushed U.S. oil consumption down to 18 million barrels a day from a peak of 20 million barrels in 2005.

Read MoreOp-ed: The silent crash in commodities—a warning sign

We think one of the biggest catalysts for the oil-price collapse is the disturbing price premium it commands over natural gas when the two are compared on an "energy equivalent" basis. Wet and dry natural gas production has risen 34 percent since 2007, capping natural gas prices, which drifted continually lower. When you take the natural gas price and run some numbers on it to make an apples-to-apples comparison to crude oil, it's "BTU-equivalent" price in barrels is just $23.

There's a reason why some city buses are running on natural gas, and it's an economic one. A whole cottage industry has sprouted up in response to the oil vs. natural gas arbitrage. One type of business has been firms that facilitate the transfer from fuel oil to natural gas for public and private enterprises. That's why if you go over to Wrigley Field to see a 19th Century ballpark being renovated, 21st Century natural gas-powered cement trucks are working away.

While a chunk of the low-hanging fruit has been plucked, a network of natural-gas filling stations is cropping up all over the U.S. According to The Department of Energy, natural gas now powers about 112,000 domestic vehicles and roughly 14.8 million worldwide.

From 1996 through 2007 and as recently as January 2009, crude oil and natural gas traded at parity on an energy-output basis. Then something odd happened: Oil went spiraling to $147 in July 2008, while natural gas "in barrels" rose to just $85. Within one single year, the two were brought back together at $35. While we don't expect oil to sink to $23, which is the current energy-equivalent natural-gas price, the truth is that "natty" is keeping oil tethered. It is justifiable to be deeply skeptical of "cheap" $61 oil.

Read MoreUS oil breaks $60 for the first time since July 2009

Commentary by Jack Ablin, the chief investment officer at BMO Private Bank. Follow him on Twitter @j_ablin.