Meanwhile, however, LNG prices have soared, China is reselling Russian LNG to Europe, and US natural gas prices are three times higher now than they were a decade ago and up 95% in the market futures for November 2022 to March 2023. And most analysts in Europe are talking about a recession. That US LNG was not going to be enough was clear from the start. As energy analyst David Blackmon, for example, has repeatedly warned since March, there is plenty of natural gas in the ground in the US, but not all of it is being mined. There are, in other words, purely physical constraints on US gas exports to Europe. Then there is the matter of price. Right now, US LNG is competitive because of the crazy curve the European gas futures market is following as Gazprom squeezed Nord Stream 1 shipments in response to sanctions. But that doesn’t mean US LNG is cheap. In fact, it’s not cheap at all, which has swelled the EU’s gas storage replenishment bill by 10 times its usual rate. Now, there is another price issue at home for US LNG. This is a problem that there were also warnings about earlier this year. In fact, earlier this year, investment firm Goehring & Rozencwajg predicted that US natural gas prices were going to take off after European ones before long. The reasons for the increase were the generally tight supply of natural gas and the new central role of US producers as the largest supplier to Europe. Also, Goehring & Rozencwajg predicted that US natural gas production was approaching a plateau. Natural gas production is currently on a strong rise, so prices have eased this week, but remain much higher than they have been in the past two decades, sparking the start of what could become a major backlash against stronger LNG exports. “We estimate that the [Joe] The Biden administration is working with European allies to expand fuel exports to Europe. A similar effort should be made for New England,” a group of governors from New England wrote in a letter to Energy Secretary Jennifer Granholm this summer, according to a Financial Times report. They then asked Washington to help their states—Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont—secure enough liquefied natural gas for the winter. That means governors have asked Washington to cut exports and redirect some of the LNG to domestic consumers. Granholm’s response to the governor, according to the FT, was to say that the administration was “prepared to use all the tools in our toolbox” to help, but also added that there would be no “blanket waivers” of the Jones Act which effectively limits transportation between US ports to US-built, US-flagged and US-crewed vessels only. In other words, no foreign-flagged ship could load LNG in Texas and ship it to Maine, which limits New England’s options. This letter from the New England governors may be a sign of greater difficulty for Washington over its ambition to help energy-starved Europe. Of course, this problem would be nowhere near the proportions of the European catastrophe, thanks to the fact that the US produces all the natural gas it consumes. However, higher prices are not something consumers or businesses welcome, especially in the midst of a war on inflation. “LNG exports have already led to significantly increased inflation through higher natural gas and electricity prices,” the group Industrial Energy Consumers of America wrote in a regulatory filing cited by the FT. Just how bad high electricity prices are for business profitability and consumer spending can be clearly seen by looking at Europe right now. Just because it can’t get that bad in the United States, after all, doesn’t mean it can’t get bad enough for Washington to start worrying. For now, there are no signs that the administration is willing to pressure LNG exporters to keep more of their natural gas at home, mainly because exports are already constrained by the Freeport LNG shutdown. However, pressure from consumer organizations may increase as the Northern Hemisphere approaches winter and energy consumption rises higher. Price pressure on consumers is also playing its part: many Americans say that while they are happy to help Ukraine and Europeans in their difficult times, they are not willing to foot the bill for those hardships. One can’t really argue with that, especially if he wants to maintain control — however slim — of Congress for the next two years. By Irina Slav for Oilprice.com More top reads from Oilprice.com:
