Natural Gas Exports Could Increase Prices

In a move that could increase natural gas prices, the U.S. Department of Energy recently granted final approval for a California based company to export natural gas to Asia, where prices are four times those in the United States, according to an article in The Oklahoman.

The approval authorizes Sempra Energy to build its Cameron LNG export facility on the Louisiana coast, from where it would export as much as 1.7 billion cubic feet of natural gas per day. The Cameron LNG facility joins Cheniere Energy’s Sabine Pass terminal on the Texas-Louisiana border as the first major facilities approved to export U.S. natural gas into the lucrative Asian market.

Natural gas exports are seen by some as a major threat to the continuation of low natural gas prices for home heating and other uses. “The propane crisis this winter was a cautionary tale of going too far too fast,” Trent Duffy, spokesman of America’s Energy Advantage, a group of manufacturers that oppose LNG exports, told the Oklahoman. “Duffy
jumped last winter because companies were exporting the fuel while domestic demand surged because of cold temperatures,” the Oklahoman reported.

Natural gas price spikes during winter are already a familiar phenomenon to customers in New York and New England, where spot market prices hit record highs last winter, at the same time that propane prices were skyrocketing. Natural gas exports are expected to begin next year at Sabine Pass and in 2018 at Cameron LNG.

Prices for a particular energy type, such as natural gas, can change dramatically within a few years. This phenomenon is well illustrated by the fact that some natural gas expert facilities are on the same sites as gas import facilities that were planned or built as recently as a decade ago, when natural gas prices were much higher.

Natural gas was selling for $3.84 per thousand cubic feet last week on the New York Mercantile Exchange, compared to Asia’s prices, which range up to $17 for a thousand cubic feet, according to the Oklahoman.

Fortune reported last week that LNG exports are part of a plan to “position the United States as an energy superpower,” in the words of U.S. Sen. Mary Landrieu (D-La.), who chairs the Senate Energy and Commerce Committee. “Responsible LNG exports are critical to the economic future of the United States and I will continue to work closely with the Department of Energy under its new, streamlined process to secure approval for additional projects in the pipeline as quickly and efficiently as possible,” she told Fortune.

The magazine reports that the Sierra Club and other environmental groups oppose natural gas exports because they fear exports will lead to more natural gas fracking. Refiners and others in the industry also fear that the new natural gas exports will increase prices for consumers.

“In supporting liquefied natural gas exports, President Obama is treating climate change like a game of peak-a-boo, opening his eyes to the harmful impacts of carbon but closing them to the devastating disruption potential of methane,” Kate DeAngelis, climate and energy campaigner for Friends of the Earth, told Fortune. “Allowing more LNG exports completely counteracts President Obama’s expressed commitment to reduce emissions and protect the public health.”

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