President Joe Biden and his administration impressed climate activists and irked former President Donald Trump and the energy industry by announcing a Jan. 26 pause on pending and future liquefied natural gas (LNG) export permit approvals.
Economics of LNG
Since the announcement, there has been a divergence in the reaction from energy industry leaders and climate organizations.Energy sector leaders say the White House’s suspension of new LNG project permits benefits America’s enemies and harms U.S. jobs, the nation’s allies, and international climate progress.
“There is no review needed to understand the clear benefits of U.S. LNG for stabilizing global energy markets, supporting thousands of American jobs, and reducing emissions around the world by transitioning countries toward cleaner fuels,” Mike Sommers, CEO of the American Petroleum Institute (API), said in a statement. “This is nothing more than a broken promise to U.S. allies, and it’s time for the administration to stop playing politics with global energy security.”
In the fallout of Russia’s invasion of Ukraine, Europe turned to the United States for assistance in its quest to eliminate its dependence on Moscow. In 2022, the United States exported about 800 LNG cargo shipments to Europe, a 141 percent increase from the previous year.
So far, Europe has been able to avert winter shortages for two years in a row thanks to a combination of immense imports and mild temperatures. However, the continent could still grapple with a looming natural gas supply shortage in the coming decades, according to a recent Rystad Energy analysis.
But while experts warn that the recent climate change measure could force the United States to fall short of its promise to ship about 5 billion cubic feet per day until 2030, others contend that restricting LNG exports could support American households.
Tyson Slocum, the director of Public Citizen’s energy program, argues that the administration’s action doesn’t affect current supplies and could be a victory for families nationwide.
“It is not in the public interest to hand Big Oil windfall profits while American families struggle to pay their energy bills,” Mr. Slocum said. President Biden’s actions today mark a first step toward ensuring American households are protected by higher energy burdens caused by record exports.”
The API disagrees, noting that U.S. LNG exports soared to an all-time high last year, domestic production surged to record levels, and domestic prices fell by more than 60 percent.
Last year, U.S. natural gas output was about 100 billion cubic feet per day. That helped the country survive the record-breaking cold in January. Recent storage data from the Energy Information Administration showed that U.S. natural gas supplies totaled 2.856 trillion cubic feet for the week ended Jan. 19. That was 110 billion cubic feet higher than the same time a year ago and 142 billion cubic feet above the five-year average.
About the Environment
Following the Biden administration’s announcement, the Sierra Club celebrated the news as climate and environmental justice activists called it a “huge win.”“At a moment where there have been record exports, it is driving up our energy costs here at home in addition to polluting communities and making the climate crisis worse,” Cathy Collentine, associate director of the Sierra Club’s Beyond Dirty Fuels campaign, said in a statement.
Industry advocates assert that natural gas is a bridge fuel to clean energy because it can support national and worldwide efforts to reduce emissions until solar and wind account for a more significant share of the power grid. Center for Climate and Energy Solutions data show that natural gas emits 30 percent less than crude oil and fewer pollutants on a per-unit basis.
Today, in the United States, 40 percent of electricity generation is derived from natural gas. By comparison, solar and wind represent 10.3 percent and 3.4 percent of the power grid, respectively.
In addition, if the United States doesn’t ship more LNG, other countries could amplify their return to coal consumption, says Rob Thummel, senior portfolio manager at Tortoise.
“U.S. LNG exports reduce global carbon emissions as natural gas typically displaces coal to generate electricity in countries such as China and India,” he said in a note. “U.S. LNG exports improve global energy security as U.S. natural gas is becoming Europe’s primary energy supply source replacing Russia.”
In 2022 and 2023, nations everywhere accelerated coal output, resulting in record-high prices.
The International Energy Agency (IEA) projects that global coal consumption will rise by 1.4 percent this year and doesn’t expect demand to decline until 2026. By comparison, global natural gas demand is estimated to climb by nearly 3 percent in 2024.
Asia will account for most of worldwide coal consumption, the group predicts.
“The report finds that the shift in coal demand and production to Asia is accelerating. This year, China, India, and Southeast Asia are set to account for three-quarters of global consumption, up from only about one-quarter in 1990,” the IEA said in the report. “Consumption in Southeast Asia is expected to exceed for the first time that of the United States and that of the European Union in 2023.”
Coal could soon face “a turning point,” but how fast Asian countries adopt renewables “will dictate what happens next,” said Keisuke Sadamori, IEA’s director of energy markets and security.
The U.S. and other advanced economies have been nudging Asian nations to adopt more green energy.
‘Slap in the Face’
Ultimately, the administration’s decision is a “slap in the face” to the U.S. energy industry, according to Phil Flynn, an energy strategist at The Price Futures Group.“The Biden administration is giving in to groups like the Sierra Club and big green political donors in pausing the approval of exports of new liquefied natural gas projects,“ Mr. Flynn stated in an analyst note. ”This is another slap in the face to the U.S. energy industry.
“The move is short-sighted and will cause harm to the U.S. oil and gas industries and could bankrupt many smaller producers who rose to the occasion and kept America warm during the recent polar vortex. Because when the going gets tough, the U.S. oil and gas industry gets going.”
Former Vice President Al Gore wrote on X that this move sends the message to world leaders that President Biden is taking the COP28 “pledge seriously.”
“If we want to enhance energy security, create jobs, and prevent environmental injustice, we should be making investments in cheaper, readily available renewable energy, not dirty and damaging fossil fuels.”
