No Impact on Domestic Prices

U.S. LNG Exports Have Not Had any Sustained and Significant Direct Impact on U.S. Natural Gas Prices.

The USLNG Association, operating under the global brand name “LNG Allies,” released an updated economic analysis today which finds—once again—that U.S. LNG exports “have not had any sustained and significant direct impact on U.S. natural gas prices.” The analysis was prepared by R. Dean Foreman, Ph.D., chief economist, Texas Oil & Gas Association. These are Dr. Foreman’s principal conclusions:

1. Amid tumultuous and uncertain times, U.S. LNG exports have remained near record-high levels but natural gas prices at Henry Hub, Louisiana, remained as low as $1.70 per million btu (mmbtu) in early Feb. 2024, marking the lowest real prices for the month on record since 1994.
2. Nonetheless, in their decision on Jan. 26, 2024, to pause all pending approvals of new LNG export facilities (see here), the Biden administration has continued to point to U.S. LNG exports, which tripled in volume since 2019, for the potential to raise domestic energy costs.
3. This decision neglects the evidence that U.S. LNG exports have actually motivated U.S. natural gas production growth and productivity, which in turn have exerted downward price pressures to the benefit of American consumers.
4. By limiting the growth for U.S. LNG exports, the Biden administration’s intervention runs afoul of basic market principles as well as the demonstrated progress that has underpinned economic and energy security for American and global consumers.
5. U.S. LNG exports have spurred incremental new U.S. production and led to improvements in technology and resource recoveries, which in turn have generally added to estimated domestic recoverable gas resources.
6. The U.S. Potential Gas Committee’s most recent estimates (YE-2022) suggest the resource base could enable future U.S. gas supply of 3,978 trillion cubic feet—equivalent to 100 years of production at 2022 levels.
7. The U.S. became a net exporter of LNG for the first time in Feb. 2016. As of Jan. 2024, U.S. LNG net exports increased by a multiple of over 40 compared with the average in 2016, while domestic real natural gas prices remained at record low levels for the month.
8. Historically, there has been little to no evidence of a direct or causal relationship between U.S. LNG exports and domestic natural gas prices. As Chart 1 demonstrates, natural gas prices remained subject to seasonal variation but generally declined in 2019 through mid-2020—and again beginning in late 2022—despite increased U.S. LNG net exports.
9. Our research demonstrates that U.S. LNG exports have not exerted any significant and sustained impact on domestic prices. Whether examining correlation analyses between domestic natural gas prices and U.S. LNG exports or employing robust modeling based on fundamental market drivers, it becomes evident that attributing higher U.S. natural gas prices to LNG exports would be inaccurate.
10. On the contrary, U.S. LNG exports have spurred production and fostered productivity gains, thus contributing to sustained downward pressure on domestic prices.

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