American Natural Gas Markets Can Meet Demand at Low Costs

A recent analysis on US natural gas markets commissioned by the American Council for Capital Formation Center (ACCF) evaluated multiple demand outlooks and draws two important conclusions. First, America has abundant natural gas resources to meet growing demand at low prices, and second, the expansion of pipeline infrastructure is projected to reduce natural gas prices, even with increased LNG export levels.

Researchers from the global research firm NERA Economic Consulting analyzed data for a variety of US natural gas export levels and differing domestic and global market conditions. Included in the analysis was a scenario where all planned pipeline expansions were completed to meet increased demand from overseas.  In this scenario, the researchers found that the US has ample resources to meet increased demand for natural gas from overseas markets – while also meeting domestic heating, manufacturing, and electricity needs – and keeping costs low for Americans.

In their summary, NERA researchers noted that constraints within the existing federal permitting approval process “have contributed to delays and cancelations of multiple pipelines, which illustrates high project specific risks and uncertainty. In contrast, the [NERA] analysis shows that the expeditious build-out of planned or additional pipeline infrastructure without permitting delay is important to alleviate short term price impacts and provide for more efficient development of low-cost resources.”  This means that we need to modernize our permitting processes here in the US to ensure that we can remove the barriers that are constraining our ability to build energy infrastructure.

Study highlights:

  • America has the abundant resources to meet growing demand at relatively low prices: Government data estimates that there are enough recoverable resources of dry natural gas to support both domestic and export demand within a reasonable $3 to $4/MMBtu range.
  • The lack of pipeline infrastructure is a “material impediment” to lower energy prices: The ACCF study notes that a lack of new pipeline infrastructure contributes to market disruption. Northeasterners close to the Marcellus and Utica shale gas basins are especially affected by cancelled pipelines that could lower their electricity and heating expenses.
  • Expanded pipeline infrastructure is projected to reduce natural gas prices, even with increased LNG export levels: Instead of increasing, the ACCF study confirms that natural gas prices will decrease as a result of expanded pipeline infrastructure accessibility. By 2025, prices would drop between $0.25 and $0.30/MMBtu, and between $0.25 and $0.40/MMBtu by 2035.

The world’s need for clean, affordable, reliable, and responsibly sourced energy is going to continue to grow – and as this study shows, America can supply our allies with the fuel they need, while also keeping prices at home low and stable.  If policymakers want to further decrease energy prices for American families and businesses, they should modernize our permitting processes to ensure that infrastructure can be built to allow for American energy to be transported in the most efficient manner to where it’s needed most.

For additional study resources, click here:

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