While the price movement may not be as immediately apparent to the average consumer as the spike in gasoline, it will contribute to the inflation that has haunted Biden for months, primarily by increasing costs for food, heating, plastic and utility bills. Homeowners in some states who rely on gas have complained that their winter heating costs have nearly doubled from the previous year.
In contrast to oil production, which declined sharply when the pandemic kept people from driving, natural gas production reached its all-time high last year and remains strong. But demand outstripped that extra supply, as a late spring cold spell in some parts of the country and a heat wave in others kept spring consumption high.† when it usually decreases.
On top of that, the US has become the world’s largest exporter of liquefied natural gas – meaning that US consumers are increasingly competing with buyers abroad for gas production in their own country. Most of these exports go to European allies who want to reduce their dependence on Russian natural gas in response to Moscow’s invasion of Ukraine. And US export capacity expected to grow further as companies continue to open factories along the Gulf Coast, so the surge in demand is enough to offset the surge in production.
Republicans haven’t devoted much to the natural gas market so far, although Alaska Sen. Dan Sullivan has attributed the increase to a lack of infrastructure to match the increase in supply.
“We’ve had gas supplies for hundreds of years,” Sullivan said. “What we don’t have and what the Biden administration doesn’t easily provide is the infrastructure to move it. That will contribute to energy prices more than anything else.”
The price increase could be a blessing 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 energy.
“If you’re the Biden administration, the negative thing is that rising natural gas prices will fuel inflation,” Jones said. “But it’s positive because it will accelerate the shift to renewables.”
The White House has attempted to counter higher gasoline prices with a massive release of crude oil from the Strategic Petroleum Reserve. But the government has few levers it can pull to reverse the rise natural gas prices.
When asked at a White House news conference last week about raising energy costs, Biden pointed to tax credits his administration pushed for alternative energy and efficiency — but nothing that would ease financial pressures. 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 news conference. “Estimated Savings: $500 per year on average.”
A spokesman for the Department of Energy pointed to predictions that natural gas production will eventually catch up with demand, although the statistical arm, the Energy Information Administration, said this week it expects Louisiana benchmark price to average $7.83 per quarter in the second quarter. million BTU and will increase to $8.59 for the second half of the year.
“Both short- and long-term forecasts of [the Energy Information Administration] show that domestic production is expected to continue to increase to support increased LNG export demand and domestic demand,” the spokesperson said. said. “Prices are expected to return to lower levels as production picks up and storage levels in the US, which have been brought down to below average due to unexpected late winter demand, are being replaced during the refill season.”
Higher natural gas prices could further scrutinize the liquefied natural gas industry. The export is criticized by Massachusetts Sen. Elizabeth Warren and a handful of other Democrats as a threat to US consumers, but the industry continues to receive bipartisan support. The Biden administration has valued gas exports as a useful geopolitical tool that allows the US to provide Europe an economic alternative to Russia energy. The Trump administration also followed the same strategy, with former Secretary of Energy Rick Perry referring to the commodity as “liberty gas.”
The amount of gas flowing to export facilities — mostly along the Gulf Coast — has grown exponentially since the Obama administration approved the first liquefaction permit in the lower 48 states in 2012. Shipments of U.S. gas to Western Europe in January and February alone totaled 332 billion cubic feet, three times the volume for the same time last year, according to the DOE’s Energy Information Administration.
Companies like Cheniere Energy, the largest LNG exporter in the US, are expected to transport 12.4 billion cubic feet of gas per day by 2022, a 25 percent increase from the previous year, the Energy Information Administration predicted. That growth, combined with an industry that has become reluctant to accelerate its steady production increases, means LNG exports accounted for more than 10 percent of U.S. gas consumption as in March, increased from virtually zero in 2016, according to EIA data.
“LNG exports are a contributing factor to current natural gas pricing,” Richard Meyer, vice president of Energy Markets for the American Gas Association, said in a briefing with reporters, though they †not necessarily the [only] factor.”
The growth in LNG exports has not only increased demand for US gas, but has also linked the domestic gas market more closely to those in Europe and Asia, where prices are much higher, said Francisco Blanch, chief of commodities research at Bank of America. Merrill Lynch.
When prices rise in some European countries, as was the case recently when the UK paid $24 per million Btu in September — more than three times the current cost in the U.S. — traders are confident that they are reducing the cost of U.S. gas. long the point that most Americans would consider normal and yet make a profit abroad.
“The correlation between domestic and international prices has grown exponentially,” Blanch says. “Four or five years ago, there was very little connection. But now you have seen a huge increase in the correlation.”
While the higher natural gas price would normally be a boon to Biden’s goal of increasing wind and solar generation because it makes clean energy sources more competitive, the government may not be able to benefit from it, some analysts said.
The solar industry says Commerce Department trade inquiry has already damaged the import of solar panels and has jeopardized about half of the planned capacity expansions. Meanwhile, large-scale renewable energy project developers face years of queues to obtain connections to electricity grids from regional grid operators, it said Xizhou Zhou, vice president and director for global energy and renewables at analyst firm S&P Global.
“There is a chance that this year [green power generation] additions may be even slower or new investment decisions may be even slower than in the past, despite high natural gas prices,” Zhou said. “It’s really a policy and regulatory risk with renewables that needs to be addressed.”
Still, oil and natural gas prices will remain elevated for longer, utilities will remain optimistic about renewables and view slowdowns and cost spikes as a falter in the long-term clean energy game, some industry representatives have said.
“What people don’t talk about is that the increase in the cost of renewable energy is much, much lower than the rise in the price of fossil fuels – all of them, be it coal, gas or diesel,” said André Gluski, chief executive of AES Corp., during the company’s earnings call for renewable energy development last week. “So basically, renewables today are more competitive than ever. And in almost all cases I can say that the energy from renewable sources is the cheapest energy.”
Catherine Morehouse contributed to this report.