When a natural gas export terminal on the Texas coast exploded on June 8, 2022, the plant closed, and the price of gas in the United States suddenly dropped.
By the end of the day, it had plummeted 16 percent.
The reason: supply and demand. The facility, Freeport LNG, was then one of seven sites in the United States where gas was being liquefied at cryogenic temperatures and shipped overseas. When it closed, less gas could be exported.
If gas prices can crash when one plant stops exporting, what does that mean for the years ahead? Will prices rise as the country exports more and more gas overseas?
Higher gas costs could dramatically affect people’s heating and electricity bills because North American exports are expected to at least double between 2024 and 2028 as new terminals open. Gas prices will also help determine whether President Donald Trump’s “energy dominance” agenda lowers expenses for American consumers or raises them at a time when new U.S. tariffs are spurring worries of a recession and putting pressure on prices across the economy.
Trump suggested last week in the Oval Office that buying billions of dollars of U.S. energy exports could be a way for Europe to avoid his tariffs.
Any increase in energy costs breaks Trump’s promise to voters last year that he would cut energy prices in half in his first 18 months, said Tyson Slocum of Public Citizen.
“It’s deliberate sleight of hand,” said Slocum, director of the consumer advocacy group’s energy program. “Right now, every major action I’ve seen him undertake is actually going to increase price.”
The White House did not respond to requests for comment about Slocum’s assertion or whether Trump has concerns that increased exports could diminish his ability to lower energy prices for Americans.
Back in 2022, the benchmark U.S. gas price dropped to about $7 per million British thermal units after the Freeport outage. Prices went up after Russia’s invasion of Ukraine, but they’ve traded at lower levels in recent years. Gas was trading Friday at less than $4 per million British thermal units amid a broader plunge in stocks and commodities tied to Trump’s tariff policies.
Heather Browne, a spokesperson for Freeport LNG, the company that owns the terminal where the 2022 explosion occurred, declined last week to comment on LNG prices but said the facility’s three units were operating.
But while federal studies consistently point to moderate price increases, experts fiercely disagree with methods and results of those studies. Some say it exaggerates the increases. Others say it misses the dynamics that will send prices skyward.
There’s also an array of anecdotal evidence pointing in just about every direction.
On one hand, natural gas prices have stayed low or gotten lower even as U.S. exports have gone from basically zero to world-leading. With seven plants operating for most of last year, the average benchmark price for natural gas for 2024 was a record low $2.21 per million British thermal units, according to the U.S. Energy Information Administration. But EIA says it expects LNG to be the biggest driver of increased demand that will push prices higher this year and the next. It’s projecting the average spot price will more than double by 2026, to an average of $4.50 per MMBtu.
And market watchers often project domestic price hikes when LNG demand rises. But the LNG industry also is growing so quickly worldwide that some observers are warning that a global glut of liquefied natural gas could drive uncertainty and push down prices all over the world.
The Department of Energy tried to take a more data-driven approach in recent years. It commissioned at least six studies on the economic effects of LNG exports. They have generally projected mild price increases for consumers while predicting long-term benefits for the U.S. economy.
DOE studies
The debate has been driven in recent months by the most recent of those studies commissioned by then-President Joe Biden, which found that a surge in exports could add an extra $122.54 on average — in current dollars — to a household’s natural gas and electricity costs by 2050.
At roughly $10 a month, that’s not a staggering amount. It could be painful for lower-income ratepayers who would be hurt by any increase. But it’s a little less than the country’s current average household utility bill for one month. The study also projected wholesale gas prices could rise by around $1 per MMBtu, an increase of about 31 percent.
Paul Cicio said price hikes for the manufacturers he represents as president of the Industrial Energy Consumers of America are already much higher than what DOE predicted they would be in 25 years.
To Cicio, it’s simple. More exports mean less supply for consumers in the United States. This winter, he said, pipeline companies were ordering his members to scale back their use of gas because of scarce supplies and lack of pipeline capacity. Some local distribution companies and operators of intrastate pipelines, Cicio said, fully cut off — or curtailed — manufacturers. And he said foreign buyers could keep getting gas because they have 25-year guaranteed contracts, while some manufacturers had their natural gas costs this year rise twentyfold.
“Mr. Trump, God bless him, says we have an America First policy,” Cicio said in an interview. “Well, we don’t have an America First policy when we have 25-year contracts guaranteeing supply for non-U.S. customers. That is making it harder for U.S. customers.”
The gas industry says the problem that Cicio and his association are highlighting is not a result of scarcity caused by exports.
Instead, said Joan Dreskin, general counsel at the Interstate Natural Gas Association of America that represents interstate pipeline companies, it’s caused by a lack of pipeline capacity because of how difficult it is to build pipelines in the United States. Both INGAA and the Industrial Energy Consumers of America support additional pipeline capacity.
The December DOE report estimated LNG exports could cost the industrial sector $125 billion, cumulatively, from 2020 to 2050.
But Cicio said the authors are badly underestimating. When it comes to prices, he said, it’s wrong to look at price increases as something that would happen slowly and steadily over the years. Instead, he said, it’s big spikes at crucial times, like winter storms.
Industrial Energy Consumers of America has recently developed a proposal to allow DOE to order natural gas exporters to slow down exports when cold weather is approaching that could crimp domestic gas supplies. The group is in the process of showing it to DOE officials and other agencies.
“We are for an LNG policy that puts America first,” Cicio said, “not an America last policy, which is what we have now.”
‘Basically free gas’
Supporters of LNG exports say shipping U.S. gas overseas hasn’t driven up domestic energy prices so far — and won’t in the future.
Before 2016, there were essentially no LNG exports from the Lower 48 states. Now, the United States is the world’s largest exporter of LNG. Charlie Riedl, executive director of the Center for LNG, a trade group for gas exporters, said gas prices have gone down even as exports have soared.
“Despite record U.S. LNG exports, Americans enjoy some of the lowest residential natural gas prices in the world,” Riedl said in an emailed statement. “Since first export in 2016, natural gas production has outpaced LNG export growth nearly threefold, and Henry Hub prices have averaged 37% lower than the previous decade.”
The reason for that is simple, said Kenneth Medlock, an energy economist at Rice University’s Baker Institute for Public Policy. Natural gas prices have stayed low despite surging exports because in West Texas and southeastern New Mexico, producers are basically giving the gas away.
It’s called “associated gas.” Natural gas is basically an unwanted byproduct in the Permian Basin, the highest-producing oil field in the United States. Producers have more than they know what to do with. Venting it into the atmosphere or burning off is frowned upon. So it sometimes trades at prices below zero.
“It’s basically free gas,” Medlock said. “We can basically cover what’s under construction with associated gas.”
Early studies on LNG’s economic effects, he said, didn’t anticipate that huge, cheap supply. And should that supply dry up, Medlock said, there’s another underutilized source of gas in western Canada just waiting for the price to go up high enough to make it worthwhile.
While Cicio of the manufacturers group said the December study from DOE underestimates how much prices could rise, other energy experts say it overstates them.
Mike Fulwood, senior research fellow at the Oxford Institute for Energy Studies, said the study projects export levels from the United States that are implausibly high.
“Even a brief review suggests the ‘facts’ as outlined in the DOE report are much closer to fantasy, with implausible scenarios and flawed assumptions,” Fulwood wrote in a January critique of the report. He said an increase of 4 percent to 8 percent in the wholesale price of U.S. natural gas is “more realistic” than 31 percent.
“A much smaller rise in US LNG exports would likely lead to a much smaller increase in prices if any increase at all,” he said in an email exchange.
But when the Resources for the Future think tank looked at the DOE report, it estimated that price projections should be more than two times higher.
Asked about criticism of the gas industry, the American Gas Association, which represents natural gas utilities, pointed to its December statement criticizing the DOE the study findings as a “clear and inexplicable” attempt by the Biden administration to justify the pause it placed on LNG permitting in January 2024.
Asked about criticism of the DOE study released in December, at the end of the Biden administration, the department responded with praise of “the Trump administration’s leadership.”
“We can lead the world in energy production while lowering energy costs here at home,” DOE spokesperson Ben Dietderich said in an emailed statement.
That recent DOE statement also referred to a 2023 draft report the Trump administration released, saying that Biden officials “intentionally buried” it. The earlier report downplays the prospect of price increases, noting that the wholesale price is expected to rise “modestly.”
The 2024 report came up with a higher increase for households, adding increases in electricity and gas bills to come up with the $122.54 number. But some of their numbers are similar. For example, they both project 4 percent increase by 2050 in the residential cost of natural gas, specifically.
Environmentalists have fought LNG mostly on the basis of its climate impacts, saying that encouraging the use of gas hinders the adoption of solar, wind and other renewable energy. But one environmental researcher, Shelley Robbins, senior decarbonization manager at the Southern Alliance for Clean Energy, said there are hidden ways it could hit energy consumers in the wallet.
Utility customers, she said, could wind up subsidizing the construction costs for the pipelines needed to feed the export terminals.
The Interstate Natural Gas Association of America’s Dreskin said utility regulators would prevent that. But Robbins said at least some of the gas in new pipelines, from which companies get a guaranteed return, will go to exports instead of ratepayers.
“Lots of that capacity is going somewhere else,” Robbins said in an interview. “Ratepayers are going to pay for it. It’s a straight pass-through.”
