Although the price movement may not be as immediately visible to the average consumer as the gasoline surge, it will contribute to the inflation that has dogged Biden for months, primarily by increasing the costs of food, heating, plastics and utility bills. Homeowners in some gas-dependent states have complained that their winter heating costs have nearly doubled from the previous year.
Unlike oil production, which fell sharply when the pandemic kept people from driving, natural gas production peaked last year and remains strong. But demand outstripped this extra supply, as a cold spell in late spring in some parts of the country and a heat wave in others kept consumption high in the spring., when it usually decreases.
In addition to that, the United States has become the world’s largest exporter of liquefied natural gas, which means that American consumers are increasingly competing with foreign buyers for their own country’s gas production. Most of these exports go to European allies seeking to reduce their dependence on Russian natural gas in response to Moscow’s invasion of Ukraine. And U.S. export capacity set to grow further as companies continue to open factories along the Gulf Coast, ensuring that increased demand is enough to offset production gains.
So far, Republicans haven’t devoted much messaging to the natural gas market, though Alaska Sen. Dan Sullivan attributed this increase to the lack of infrastructure capable of meeting the increase in supply.
“We have hundreds of years of gas supply,” Sullivan said. “What we don’t have and what the Biden administration doesn’t readily provide is the infrastructure to move it. This will do more than anything to help reduce energy prices.
The price This increase could be a boon and a curse for the Biden administration and its green energy aspirations, said Mark Jones, a political science professor at Rice University in Houston who focuses on the politics of the energy.
“If you’re the Biden administration, it’s negative that rising natural gas prices are driving inflation,” Jones said. “But it’s positive in that it will accelerate the shift to renewables.”
The White House attempted to counter rising gasoline prices with a massive release of crude from the Strategic Petroleum Reserve. But the government has few levers it can pull to reverse the rise in natural gas price.
Asked about rising energy costs at a White House press conference last week, Biden pointed to tax credits his administration was pushing for alternative energy and efficiency — but nothing. which would not alleviate the financial pressure short term.
“Tax credits for people to buy solar panels and heat pumps and more efficient windows and doors for their homes,” Biden said at the press conference. “Estimated savings: $500 per year on average.”
A spokesman for the Department of Energy pointed to forecasts that natural gas production will eventually catch up with demand, although its statistics arm, the Energy Information Administration, said this week that it expects Louisiana benchmark price to average $7.83 per million BTUs in Q2 and rising. to $8.59 for the second half of the year.
“The short-term and long-term projections of [the Energy Information Administration] show that domestic production should continue to increase to support increased demand for LNG exports, as well as domestic demand,” the spokesperson said. mentioned. “Prices are expected to return to lower levels as production increases and US storage levels, which were reduced to below average levels due to unexpected demand at the end of the month. winter, are replaced during the filling season.”
Rising natural gas prices could lead to even closer scrutiny of the liquefied natural gas industry. The exports drew criticism from the Massachusetts Sen. Elizabeth Warren and a handful of other Democrats as a threat to American consumers, but the sector otherwise receives bipartisan support. The Biden administration has valued gas exports as a useful geopolitical tool for the United States to offer Europe an economic alternative to Russia energy. The Trump administration has also pursued the same strategy, with former Energy Secretary Rick Perry calling the commodity “freedom gas.”
The amount of gas flowing to export facilities – primarily along the Gulf Coast – has grown exponentially since the Obama administration approved the first liquefaction permit in the lower 48 states in 2012. US gas to Western Europe in January and February alone was $332 billion. cubic feet, tripling the volume for the same period last year, according to the DOE’s Energy Information Administration.
Companies like Cheniere Energy, the top U.S. LNG exporter, are expected to ship 12.4 billion cubic feet of gas per day in 2022, a 25% increase from a year earlier, according to the Energy Information Administration. This growth, combined with an industry that has become reluctant to step up its steady production increases, means that LNG exports accounted for more than 10% of US gas consumption as of March, compared to virtually zero in 2016, according to EIA data.
“LNG exports are a contributing factor to current natural gas pricing,” American Gas Association Vice President of Energy Markets Richard Meyer said during a briefing with reporters. although they are “do not necessarily the [only] factor.”
Growth in LNG exports has not only increased demand for U.S. gas, but has also tied the domestic gas market more closely to those in Europe and Asia where prices are much higher, said Francisco Blanch, chief executive. commodity research at Bank of America. Merrill Lynch.
When prices in some European countries rise, as they did recently when the UK paid $24 per million Btu in September – more than three times the current US cost – traders are convinced that they can drive the price of US gas well beyond the point that most Americans would consider normal and still make profits overseas.
“The correlation between domestic and international prices has increased exponentially,” Blanch said. “Four or five years ago, there was very little connection. But now you’ve seen a huge adoption of correlation.
While rising natural gas prices are normally a boon to Biden’s goal to increase wind and solar power generation because it makes clean energy sources more competitive, the administration might not be able to capitalize on it, some analysts said.
the Solar Industry Says Commerce Department Trade Investigation has already hurt solar panel imports and jeopardized about half of planned capacity additions. Meanwhile, developers of large-scale renewable energy projects face years-long queues to secure connections to power grids from regional grid operators, said Xizhou Zhou, vice president and general manager of global energy and renewables at analyst firm S&P Global.
“There is a chance that this year [green power generation] additions could actually be slower or new investment decisions could be even slower than in the past despite high natural gas prices,” Zhou said. “It’s really a political and regulatory risk with renewables that needs to be eliminated.”
Still, the longer oil and natural gas prices stay high, the more utilities will remain bullish on renewables and view delays and cost spikes as a blow to the long-term clean energy game, the report said. said some industry representatives.
“What people don’t talk about is that the increase in the cost of renewable energy is much lower than the increase in the price of fossil fuels – all, whether coal, gas or diesel,” said Andre Gluski, chief executive of AES Corp., during the renewable energy development company’s first quarter earnings call last week. “Renewable energies are therefore more competitive today than ever. And in almost all cases, I can say that energy from renewables is the cheapest energy.
Catherine Morehouse contributed to this report.