USA Liquified Natural Gas Exports

Natural Gas Prices expecting a volatile year

Natural gas pricing in the U.S. is projected to have another unpredictable and volatile year, after the intense effects of countrywide storms, weather changes, and LNG exports that occurred in 2021.

With regards to weather, 2021 started off on a negative note with the Texas storms and everything the ERCOT grid went through. You saw executives resign and relinquish their roles at several utilities as well as the TX utility commission. We also experienced a very hot summer that extended into your typical fall months. Combine these events with Hurricane Ida, and you have a recipe for a highly volatile energy market. It’s no secret that Illinois customers who are on a ComEd Hourly variable plan saw some of the highest rates in Q3-Q4 of 2021. 

Taking a look at the history of LNG (liquified natural gas) exportation for the U.S., it is to note that international LNG transport did not have the infrastructure built to be able to ship to multiple areas in Europe and Asia prior to ~5 years ago. The U.S. natural gas market pricing was predicted by the local and domestic market, mostly by the observation of abrupt or irregular weather changes. Now, however, with 2022 seeing the effects of the supply chain shortage across the globe, the U.S. is seeing an increase in demand for natural gas exports.

Fast-forward to today, U.S. gas exports are taking a larger percentage of domestic natural gas production, according to this article, posted by Bloomberg. See the graph below for reference:

In conjunction with a record-setting amount of LNG exports, U.S. natural gas production has reached an all-time high with production facilities mining shale fields from Texas to Pennsylvania. Some experts are predicting LNG facilities to reach a point of producing more natural gas than the market can handle, threatening to swamp the market with more gas than it can burn.

So what does all this mean for U.S. consumers? We should expect to see a definite rise in pricing over the course of 2022 as high demand in Europe and Asia bring along a price war, where they are willing to pay a very high premium for American LNG exports. 

In some cases, this can be upwards of a 400-1000% increase for what Americans are currently paying. As an LNG business owner, the incentive to raise prices in the U.S. when they are making 4 to 10 times more profit on the resource overseas is almost an obvious business decision. Americans could potentially expect to see prices for natural gas double, or possibly more, throughout 2022 into 2023.

Could the idea of having an abundance (aka oversupply) of NG in 2022 bring prices down? If they do, for how long? What variables need to be considered for individuals hoping for a bearish market? Please contact us as we welcome expert perspectives on the natural gas market. 

Article for reference: U.S. Natural Gas Faces Wild 2022 as Foreign Crises Exert Pull