It is being said that the boom in the US natural gas exports
comes at the expense of domestic households. It has also become a major point
of contention in the heated debate over the Biden administration’s decision to
halt permitting for new gas export terminals.
Proponents of the exports argue these overseas sales keep
prices down for the domestic consumers by calming global markets and
incentivizing US oil and gas companies to produce more fuel.
Reportedly, US natural gas prices hit
a 40-month low last week at just US$1.91 per mmBtu as the combined effect of
mild weather, strongly rebounding production and sizable inventories continue
to weigh on prices.
August Pfluger told The Hill that despite nearly a decade of
gas exports, we have had a competitive advantage worldwide while prices have
remained very, very low inside the US.”
Pfluger,
who represents the Permian Basin, one of the major sources of gas being
exported, sponsored a bill approved by the House on Thursday that
would strip the president of the authority to approve or disapprove new
gas exports.
Proponents hope the measure, which is unlikely to advance in
the Democrat-controlled Senate, would open the floodgates for both
terminal construction and liquefied natural gas (LNG) exports.
Export opponents, on the other hand, contend that they make
the US gas supply — and the prices Americans pay for the fuel — less
stable by tying them to the increasingly tumultuous world beyond the country’s
borders.
“Whether
it’s a coal crisis in China, a cold snap in Asia, unrest in the Middle East, a
pipeline explosion in Europe — anytime global gas markets sneeze, we’re going
to catch a cold,” said Clark Williams-Derry of the Institute for Energy
Economics and Financial Analysis.
Williams-Derry argued that the gas companies’ price gouged
American consumers by tying the US to global gas markets — and thereby to the
surging prices that, for example, accompanied the Russian invasion of Ukraine.
As formerly cheap US gas supplies went to suddenly gas-starved
— and wealthy — European countries since 2022, total US spending on gas surged
by around US$120 billion dollars, or about US$975 per American household,
he wrote.
“We’ve already dug ourselves into the crazy hole,” he said.
“And now we’re going to be exporting 25% or more of our gas.”
The buildout in export terminals has forced US consumers
into competition with entire countries, said Paul Cicio, president of the
Industrial Energy Consumers of America (IECA), a diverse trade group of
factories and manufacturers united in their demand for cheap domestic gas.
According to IECA, Williams-Derry has underestimated
the cost of gas exports to American households. In testimony to Congress last
week, it argued that gas exports had driven up prices in 2022 alone by the
equivalent of US$137 billion — and fueled inflation throughout the entire economy.
IECA has been vehemently opposed to oil and gas exports
since well before the first gas terminal was completed in 2016 in the
United States.
Before such terminals were built, Cicio said, gas
producers sold to utilities or companies — while now they have the opportunity
to sell to entire countries, or at least to major state-owned companies. One
paused project has signed deals with Germany and China’s state-owned
gas company.
“It doesn’t matter if it’s the middle of winter here — peak
demand, inventories are low, prices are high — those countries will buy it
away, drive up the price of gas and electricity,” Cicio said.
Since the war in Ukraine began, the IECA has argued for what
it calls a “safety valve” — a congressional or administrative rule
that would limit exports if the gas supplies are low in the country.
But export proponents, including oil and gas companies and
congressional lawmakers who represent key gas-producing areas, contend that
unlimited exports are in the public interest — and that restricting them would
negatively impact American prices.
While
many export terminals — those that have already received their Department of
Energy permits — would still be built whatever the Biden administration decides
regarding new permits, Pfluger, the Texas congressman, argued that the
announcement of a coming pause would send dangerous ripples through the
industry.
“When you signal to the industry that there could be some
political instability or turbulence, then that leads to more volatility in the
price than anything else,” Pfluger said.
By
suggesting that gas exports would be bottlenecked and even decline, he said,
the administration was signaling drillers and pipeline builders to begin
slowing down as well — thereby driving up prices.
“These projects don’t happen overnight,” Pfluger said. “You
can’t turn them on and off like a light switch.”
Supporters
of unlimited exports argue that if gas producers in regions like the Texas
Permian or the Marcellus Shale of Pennsylvania don’t have ready access to
foreign markets, they won’t produce as much gas for Americans either.
Benjamin Leibowicz, who teaches energy policy and
mathematics at the University of Texas at Austin, pushed back on the idea
that that exports lead to cheaper domestic prices, however, saying
it doesn’t make sense in the short term.
“If there are more gas consumers and higher demand, that
translates to higher prices,” he told The Hill — though he emphasized that he,
too, thought this would spur more drilling.
Gas export terminals open American gas production to a
globe full of potential consumers, most of them live in regions where gas is
far more expensive than it is in the US.
In both Europe and Asia, for example, gas prices in December
were nearly about five times what they were in the US
That represents an opportunity for American gas
producers who would like to get more money for their fuel.
But it also puts American consumers accustomed to
paying US$2.50 per unit of gas in competition with Europeans willing to pay US$11.5,
or East Asians willing to pay US$13.
As early as 2009 — seven years before the first tanker of
LNG set sail from the Gulf Coast to Europe — economists predicted a “strengthening
relationship” between European and American gas prices if LNG trade picked
up.
That’s essentially what happened, the U.S. Energy
Information Agency concluded in 2023. The agency found that higher
LNG exports decreased domestic supplies of natural gas, “increasing
domestic natural gas prices.”
That finding, in addition to climate concerns, was a
major reason why Democrats called on the administration to halt the
expansion of gas exports — or at least, that expansion’s long tail.
“I’m just seeing record profits for LNG, but I don’t see the
benefits coming into Americans in my community,” Catherine Cortez Masto told David
Turk, deputy secretary of the Energy Department, in
a hearing last week.
