Current Event Post- Business Analysis- Natural Gas Exporting: Should or Should Not?

With the new drilling technology for the past five years, the United States has found itself potential low-cost natural gas supplies.   “There is interest on the part of the public and private sector in the prospect of significant exports of U.S. natural gas in the form of liquefied natural gas (LNG).” (Avasarala)    According to Houston Chronicle, experts at IHS CERA say the potential market for exports to Canada will hit 4 billion to 5 billion cubic feet per day by 2020, mostly by pipelines.  Also selling natural gas in Asian and European markets will increase the prices up to 5 times that could make a huge profit for U.S. economy.  Avasarala also mentioned that “in light of current global supply and demand projections, some amount of U.S. LNG exports is likely to be competitive in global markets.”  The study also mentioned the upward domestic prices, job creation, positive contribution to the U.S. GDP, trading, global greenhouse gas competitiveness.  In addition, on the Wall Street Journal, natural gas futures “help relieve the glut of supplies currently holding down prices in the U.S.”  However, this problem is still on discussion table; no one has decided whether U.S. should export, “where and how much the U.S. should share the bounty with foreign countries.”  Why?  There are some arguments and agreements still open for President Barak Obama and The Energy Department’s final decision.  Some of them agree new exporting policy because of domestic competitiveness between companies and manufacturers.  GDP will increase instantly because natural gas is traded on “non-integrated markets”, which results the huge variation in different places around the world.  U.S. could get the positive or negative exchange rate, but mostly positive because of U.S. dollar.  Exporting natural gas globally could open more market of cars and more electricity to those further developing contries.  “Put the U.S. on track to export to 16 billion cubic feet of LNG each day, which is nearly a quarter of U.S. daily production in 2011”, accords to Houston Chronicle.  Moreover, drilling technology has been improving recently that allows to “extract natural gas from dense rock formations coast to coast and tap what analysts widely describe as a 100-year of the fossil fuel.”  Is this information right?  The Wall Street Journal pointed out the hot weather condition across much of the country over the past few weeks has led to the shortage of storage capability later this year.  The heat has increased the demand for gas utilities as home and businesses’ air conditioning.  In addition, export could cause the prices to spike, sending electricity bills upward, according to an Energy Information Administration, it will increase by “1% to 3 % from 2015 to 2035” and industrial bill will climb by “9% to 28%”.  Administration of ficials says that they will make those decisions after they get results from a study commissioned by Energy Department.  White House energy adviser Heather Zichal said, “We want analysis to drive decisions” while President Obama and Republican challenger Mitt Romney have avoided making big announcement. 

References: The Wall Street Journal

Brookings Article

Dlouhy, Jennifer. “Natural Gas Glut Poses a Dilemma for Obama.”  July 15, 2012.                     Houston Chronicle.

Dicolo, Jerry. “U.S. GAS: Future Gain as Export Plans Move Forward.” July 12, 2012. July 16, 2012.  The Wall Street Journal. < http://online.wsj.com/article/BT-CO-20120712-713327.html>

Avasarala, Govinda.  “Liquid Markets: Assessing the Case for U.S. Exports of Liquefied Natural Gas.” May 2012. July 16, 2012.  Energy Security at Brookings. <http://www.brookings.edu/research/papers/2012/01/natural-gas-ebinger>