So the United States may have to live with natural gas prices around $5 per MMBtu instead of the $2–3 range it has enjoyed?
That is certainly a substantial increase.
More than 50%, depending on where you start.
Those are big numbers.
Shocking numbers, perhaps.
But before we panic, it might be useful to put them into context.
What are natural gas prices elsewhere in the developed world?
Several times higher.
In some markets, they can be four times the levels being discussed for a future US price of $5 per MMBtu, and sometimes considerably more.
That changes the entire meaning of the number.
If American natural gas rises to $5, the United States would still be operating with an energy input cost that is roughly a quarter of what competitors in parts of the developed world have to absorb.
A price increase can therefore be significant without becoming a competitive disaster.
This distinction seems to get lost remarkably easily.
The United States has become accustomed to exceptionally cheap natural gas. That creates an understandable tendency to regard anything above $3 as a crisis. But $3 is not some natural law governing the price of gas. It is simply an unusually favourable price made possible by America’s enormous domestic resource base, highly developed production infrastructure and mature gas market.
If that price moves to $5, American energy does not suddenly become expensive by international standards.
It remains extraordinarily cheap.
And that matters enormously for the economy.
Energy-intensive manufacturing does not look only at whether American gas has become more expensive than it was last year. It looks at what energy costs in competing jurisdictions.
If a manufacturer can buy gas in America for $5 while facing several times that cost elsewhere, the United States remains an extraordinarily attractive location for energy-intensive production.
The American economy can continue to treat energy as an operating cost rather than an existential threat.
That is a significant advantage.
It means industries that require large amounts of heat, electricity or chemical feedstock will continue to have an incentive to locate in the United States.
It means American industry can absorb a substantial increase in gas prices without immediately losing its competitive position.
And it means I am not particularly worried about American energy.
There appears to be considerably more reason for confidence than panic.
Yet panic seems to be required.
The slightest upward movement in US natural gas prices is presented as evidence that American energy is becoming uncompetitive, that domestic gas is no longer sufficient, or that the entire economic advantage of cheap American energy is somehow disappearing.
Why?
It is worth asking who benefits from that interpretation.
Could it be that parts of the renewable-energy industry have an interest in creating doubt about the long-term viability of natural gas?
Could it be that international competitors would prefer American manufacturers to believe their energy advantage is temporary?
Could it be that countries paying several times more for gas would rather discuss the supposed crisis in American gas prices than their own structural disadvantage?
Perhaps.
None of this requires a conspiracy.
It requires only incentives.
The remarkable thing is not that American gas might reach $5.
The remarkable thing is that at $5, it would still be extraordinarily cheap compared with much of the developed world.
That is not an energy crisis.
It is still a competitive advantage.
And perhaps the real question is why anyone is so eager to persuade Americans otherwise.
https://oilprice.com/Energy/Natural-Gas/The-Era-of-Cheap-US-Natural-Gas-May-Be-Coming-to-an-End.html