Do gas exports help or hurt American prices?

Has the boom in American natural gas exports come at the expense of American households?

That question has become a major point of contention in the heated debate over the Biden administration’s decision to halt permitting for new gas export terminals.

Proponents of the exports argue they help keep prices down for Americans by calming global markets and incentivizing U.S. oil and gas companies to produce more fuel. 

Rep. August Pfluger (R-Texas) told The Hill that despite nearly a decade of gas exports, “we’ve had a competitive advantage worldwide while prices have remained very, very low inside the U.S.”

Pfluger, who represents the Permian Basin, one of the major sources of gas being exported, sponsored a bill approved by the House on Thursday that would strip the president of the authority to approve or disapprove new gas exports. Proponents hope the measure, which is unlikely to advance in the Democrat-controlled Senate, would open the floodgates for both terminal construction and liquified natural gas (LNG) exports.

Export opponents, on the other hand, contend that they make the U.S. gas supply — and the prices Americans pay for the fuel — less stable by tying them to the increasingly tumultuous world beyond the country’s borders. 

Whether it’s “a coal crisis in China, a cold snap in Asia, unrest in the Middle East, a pipeline explosion in Europe — anytime global gas markets sneeze, we’re going to catch a cold,” said Clark Williams-Derry of the Institute for Energy Economics and Financial Analysis.

Williams-Derry argued that gas companies price gouged American consumers by tying the U.S. to global gas markets — and thereby to the surging prices that, for example, accompanied the Russian invasion of Ukraine.

As formerly cheap U.S. gas supplies went to suddenly gas-starved — and wealthy — European countries since 2022, total U.S. spending on gas surged by around $120 billion dollars, or about $975 per American household, he wrote.

“We’ve already dug ourselves into the crazy hole,” he said. “And now we’re going to be exporting 25 percent or more of our gas.”

The buildout in export terminals has forced U.S. consumers into competition with entire countries, said Paul Cicio, president of the Industrial Energy Consumers of America (IECA), a diverse trade group of factories and manufacturers united in their demand for cheap domestic gas.

According to IECA, Williams-Derry has underestimated the cost of gas exports to American households: In testimony to Congress last week, it argued that gas exports had driven up prices in 2022 alone by the equivalent of $137 billion — and “fueled inflation” throughout the entire economy. 

IECA has been vehemently opposed to oil and gas exports since well before the U.S.’s first gas terminal was completed in 2016. 

Before such terminals were built, Cicio said, gas producers sold to utilities or companies — while now they have the opportunity to sell to entire countries, or at least to major state-owned companies. One paused project has signed deals with Germany and China’s state-owned gas company.

“It doesn’t matter if it’s the middle of winter here — peak demand, inventories are low, prices are high — those countries will buy it away, drive up [the] price of gas and electricity,” Cicio said.

Since the war in Ukraine began, the IECA has argued for what it calls a “safety valve” — a congressional or administrative rule that would limit exports if the U.S.’s own gas supplies are low.

But export proponents, including oil and gas companies and congressional lawmakers who represent key gas-producing areas, contend that unlimited exports are in the public interest — and that restricting them would negatively impact American prices.

While many export terminals — those that have already received their Department of Energy permits — would still be built whatever the Biden administration decides regarding new permits, Pfluger, the Texas congressman, argued that the announcement of a coming pause would send dangerous ripples through the industry.

“When you signal to the industry that there could be some political instability or turbulence, then that leads to more volatility in the price than anything else,” Pfluger said.

By suggesting that gas exports would be bottlenecked and even decline, he said, the administration was signaling drillers and pipeline builders to begin slowing down as well — thereby driving up prices.

“These projects don’t happen overnight,” Pfluger said. “You can’t turn them on and off like a light switch.”

Supporters of unlimited exports argue that if gas producers in regions like the Texas Permian or the Marcellus Shale of Pennsylvania don’t have ready access to foreign markets, they won’t produce as much gas for Americans either.

Benjamin Leibowicz, who teaches energy policy and mathematics at the University of Texas at Austin, pushed back on the idea that that exports lead to cheaper domestic prices, however, saying it doesn’t make sense in the short term.

“If there are more gas consumers and higher demand, that translates to higher prices,” he told The Hill — though he emphasized that he, too, thought this would spur more drilling.

Gas export terminals open American gas production to a globe full of potential consumers, most of whom live in regions where gas is far more expensive than it is in the U.S. 

In both Europe and Asia, for example, gas prices in December were nearly about five times what they were in the U.S. 

That represents an opportunity for American gas producers who would like to get more money for their fuel. 

But it also puts American consumers accustomed to paying $2.50 per unit of gas in competition with Europeans willing to pay $11.5, or East Asians willing to pay $13. 

As early as 2009 — seven years before the first tanker of LNG set sail from the Gulf Coast to Europe — economists predicted a “strengthening relationship” between European and American gas prices if LNG trade picked up. 

That’s essentially what happened, the U.S. Energy Information Agency concluded in 2023. The agency found that higher LNG exports decreased domestic supplies of natural gas, “increasing domestic natural gas prices.”

That finding, in addition to climate concerns, was a major reason why Democrats called on the administration to halt the expansion of gas exports — or at least, that expansion’s long tail.

“I’m just seeing record profits for LNG, but I don’t see the benefits coming into Americans in my community,” Sen. Catherine Cortez Masto (D-Nev.) told David Turk, deputy secretary of the Energy Department, in a hearing last week.

In that Senate hearing, Sen. Angus King (I-Maine) raised a key question with major implications for American prices : How much is the U.S. planning to export? 

He recounted prior testimony from a gas industry lobbyist who he said promised him — in the face of similar concerns a decade ago — that the U.S. “would never go beyond [exporting] 9 percent of production.” 

But, King said, “Today we’re at 14 percent. In 2028, we’re going to be at close to 50 percent.”

“Now I’m just a country lawyer from Maine, but I don’t understand how you will take 50 percent of the production of a commodity and that won’t affect the price,” he said.

In Australia, King noted, a booming export-focused LNG industry had caused gas prices to surge fivefold — causing the country to begin debate on limiting its own exports.

Before expanding exports further, he said, “We need to know what the effect will be on a family in Michigan or New England trying to heat their house.”