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Increasing LNG exports ‘marginally positive’ for US economy
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Home › U.S. Department of Energy ›
Increasing LNG exports ‘marginally positive’ for US economy
Posted December 29th, 2015 for Rice University
in Baker Institute on Twitter Business Finance Crown Landing LNG Terminal David Ruth energy markets Fuel gas gas market gas producers gas production higher domestic natural gas prices Kenneth Medlock liquefied natural gas Liquefied natural gas natural gas prices Natural gas prices natural gas production natural gas recovery natural gas sector natural-gas supply opportunities natural-gas-intensive industries relative Petroleum industry in Western Australia Petroleum production Rice University Rice University’s Baker Institute Shale gas shale gas production U.S. Department of Energy Natural Gas Public Relations Twitter University Houston Oxford Asia
RiceUniv's picture
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– December 29, 2015
NEWS RELEASE
David Ruth
713-348-6327
Increasing LNG exports ‘marginally positive’ for US economy
HOUSTON – (Dec. 29, 2015) – Increasing the United States’ export of liquefied natural gas (LNG) above 12 billion cubic feet per day (Bcf/d) would allow the U.S. to continue to provide a competitive advantage for domestic natural-gas-intensive industries relative to their counterparts overseas, according to a new report presented to the U.S. Department of Energy from the Center for Energy Studies at Rice University’s Baker Institute for Public Policy and Oxford Economics.
The study, “The Macroeconomic Impact of Increasing U.S. LNG Exports,” was co-authored by Kenneth Medlock, senior director for the Center for Energy Studies.
The dramatic growth in shale gas production in the United States has presented a number of opportunities and challenges for the U.S. economy,“The dramatic growth in shale gas production in the United States has presented a number of opportunities and challenges for the U.S. economy,” Medlock said. “To begin, shale gas production has lowered the domestic price of natural gas so that the United States now has among the lowest prices in the world and shifted the U.S. from emerging as a significant importer to a pending exporter of LNG. This has benefitted consumers and led to gains in competitiveness for U.S. manufacturers.
“Low natural gas prices in the United States negatively impact the profitability of domestic upstream activities, which has, in fact, been a primary driver of interest in exporting LNG as suppliers seek new demands in higher-priced markets. While selling natural gas at higher prices on the world market would increase profits for U.S. gas producers, the price gap between the United States and the rest of the world will shrink, thereby eroding some of the benefits that have accrued to U.S. consumers and manufacturers. So the net balance of the gains and losses associated with trade are at the core of the analysis. In sum, the balance is positive for the U.S. economy.”
For the report, the Center for Energy Studies used the Rice World Gas Trade Model to simulate alternative futures to assess natural gas production, demand and, more generally, the international gas market based on a range of projections of U.S. resource endowments. Oxford Economics addressed the macroeconomic impact of the center’s market analysis.
A comprehensive set of scenarios was developed in the analysis – including U.S. natural gas recovery, international and domestic demand, and natural-gas supply opportunities in the rest of the world – to examine the impact on energy markets and the U.S. macroeconomy.
Key findings from the report include:
LNG exports are associated with a net increase in domestic natural gas production.
Medlock said the study found that “the majority of the increase in LNG exports is accommodated by expanded domestic production rather than reductions in domestic demand, a result that reflects the very elastic long-run supply curve in North America.”
As exports increase, the spread between U.S. domestic prices and international benchmarks narrows. In every case, greater LNG exports raised domestic prices somewhat and lowered prices internationally. The majority of the price movement (in absolute terms), however, occurs in Asia.
The overall macroeconomic impacts of higher LNG exports are marginally positive, a result that is robust under alternative assumptions. With external demand for U.S. LNG exports at 20 Bcf/d, the impact of increasing exports from 12 Bcf/d is between $7 billion to $20 billion annually from 2026 to 2040 in today’s prices.
Medlock said that the impact from added LNG exports will not be felt until after 2025 due to the large amount of LNG supply that is coming online globally in the next few years. The global market simply cannot accommodate U.S. volumes in excess of 12 Bcf/d before 2025 in any of the scenarios considered. Accordingly, while international demand continues to increase, the market must first work through a large amount of available LNG supply before turning to U.S.-sourced LNG.
The reference case forecasts U.S. LNG exports of around 6.5 Bcf/d as there are abundant, competitive resources around the world that can be delivered to international markets via LNG or pipelines. Higher U.S. LNG exports require a variety of factors that limit the otherwise competitive production of natural gas outside of the U.S. Moreover, those factors must become increasingly restrictive to raise U.S. LNG exports over 12 Bcf/d.
Across all of the scenarios assessed, “the macroeconomic impacts of LNG exports are marginally positive,” Medlock said. “Across the domestic cases, the positive impact of higher U.S. gas production exceeds the negative impacts of higher domestic natural gas prices associated with increased LNG exports. The overall macroeconomic impacts of increasing U.S. LNG exports to 20 Bcf/d from 12 Bcf/d are small, reflecting the small size of the natural gas sector and supporting industries relative to the over $13 trillion U.S. economy.”
The full report is available here.
-30-
For more information or to schedule an interview with Medlock, contact David Ruth, director of national media relations at Rice, at or 713-348-6327.
Related materials:
The full report is available at http://energy.gov/sites/prod/files/2015/12/f27/20151113_macro_impact_of_lng_exports_0.pdf.
Medlock’s biography is available at http://bakerinstitute.org/experts/kenneth-b-medlock-iii/.
Follow the Baker Institute on Twitter .
Follow Rice News and Media Relations via Twitter .
Founded in 1993, Rice University’s Baker Institute ranks among the top 10 university-affiliated think tanks in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at www.bakerinstitute.org or on the institute’s blog, http://blogs.chron.com/bakerblog.
Tags: Baker Institute, Center for Energy Studies
About David Ruth
David Ruth is director of national media relations in Rice University's Office of Public Affairs.
Jump to Navigation
Home PressReleasePoint
Free Press Release Distribution Website
Main menu
USACanadaAustraliaUKIndiaSouth AfricaNew ZealandSingaporeMore Countries
Secondary menu
GovernmentNon ProfitScienceHealth & MedicineMore Topics
Main
Submit Free Press Release
List of 70+ Free PR Sites
PR Resources
Our Services
News Type
eBooks
About Us
Contact Us
Home › U.S. Department of Energy ›
Increasing LNG exports ‘marginally positive’ for US economy
Posted December 29th, 2015 for Rice University
in Baker Institute on Twitter Business Finance Crown Landing LNG Terminal David Ruth energy markets Fuel gas gas market gas producers gas production higher domestic natural gas prices Kenneth Medlock liquefied natural gas Liquefied natural gas natural gas prices Natural gas prices natural gas production natural gas recovery natural gas sector natural-gas supply opportunities natural-gas-intensive industries relative Petroleum industry in Western Australia Petroleum production Rice University Rice University’s Baker Institute Shale gas shale gas production U.S. Department of Energy Natural Gas Public Relations Twitter University Houston Oxford Asia
RiceUniv's picture
Printer-friendly versionPrinter-friendly versionPDF versionPDF version
– December 29, 2015
NEWS RELEASE
David Ruth
713-348-6327
Increasing LNG exports ‘marginally positive’ for US economy
HOUSTON – (Dec. 29, 2015) – Increasing the United States’ export of liquefied natural gas (LNG) above 12 billion cubic feet per day (Bcf/d) would allow the U.S. to continue to provide a competitive advantage for domestic natural-gas-intensive industries relative to their counterparts overseas, according to a new report presented to the U.S. Department of Energy from the Center for Energy Studies at Rice University’s Baker Institute for Public Policy and Oxford Economics.
The study, “The Macroeconomic Impact of Increasing U.S. LNG Exports,” was co-authored by Kenneth Medlock, senior director for the Center for Energy Studies.
The dramatic growth in shale gas production in the United States has presented a number of opportunities and challenges for the U.S. economy,“The dramatic growth in shale gas production in the United States has presented a number of opportunities and challenges for the U.S. economy,” Medlock said. “To begin, shale gas production has lowered the domestic price of natural gas so that the United States now has among the lowest prices in the world and shifted the U.S. from emerging as a significant importer to a pending exporter of LNG. This has benefitted consumers and led to gains in competitiveness for U.S. manufacturers.
“Low natural gas prices in the United States negatively impact the profitability of domestic upstream activities, which has, in fact, been a primary driver of interest in exporting LNG as suppliers seek new demands in higher-priced markets. While selling natural gas at higher prices on the world market would increase profits for U.S. gas producers, the price gap between the United States and the rest of the world will shrink, thereby eroding some of the benefits that have accrued to U.S. consumers and manufacturers. So the net balance of the gains and losses associated with trade are at the core of the analysis. In sum, the balance is positive for the U.S. economy.”
For the report, the Center for Energy Studies used the Rice World Gas Trade Model to simulate alternative futures to assess natural gas production, demand and, more generally, the international gas market based on a range of projections of U.S. resource endowments. Oxford Economics addressed the macroeconomic impact of the center’s market analysis.
A comprehensive set of scenarios was developed in the analysis – including U.S. natural gas recovery, international and domestic demand, and natural-gas supply opportunities in the rest of the world – to examine the impact on energy markets and the U.S. macroeconomy.
Key findings from the report include:
LNG exports are associated with a net increase in domestic natural gas production.
Medlock said the study found that “the majority of the increase in LNG exports is accommodated by expanded domestic production rather than reductions in domestic demand, a result that reflects the very elastic long-run supply curve in North America.”
As exports increase, the spread between U.S. domestic prices and international benchmarks narrows. In every case, greater LNG exports raised domestic prices somewhat and lowered prices internationally. The majority of the price movement (in absolute terms), however, occurs in Asia.
The overall macroeconomic impacts of higher LNG exports are marginally positive, a result that is robust under alternative assumptions. With external demand for U.S. LNG exports at 20 Bcf/d, the impact of increasing exports from 12 Bcf/d is between $7 billion to $20 billion annually from 2026 to 2040 in today’s prices.
Medlock said that the impact from added LNG exports will not be felt until after 2025 due to the large amount of LNG supply that is coming online globally in the next few years. The global market simply cannot accommodate U.S. volumes in excess of 12 Bcf/d before 2025 in any of the scenarios considered. Accordingly, while international demand continues to increase, the market must first work through a large amount of available LNG supply before turning to U.S.-sourced LNG.
The reference case forecasts U.S. LNG exports of around 6.5 Bcf/d as there are abundant, competitive resources around the world that can be delivered to international markets via LNG or pipelines. Higher U.S. LNG exports require a variety of factors that limit the otherwise competitive production of natural gas outside of the U.S. Moreover, those factors must become increasingly restrictive to raise U.S. LNG exports over 12 Bcf/d.
Across all of the scenarios assessed, “the macroeconomic impacts of LNG exports are marginally positive,” Medlock said. “Across the domestic cases, the positive impact of higher U.S. gas production exceeds the negative impacts of higher domestic natural gas prices associated with increased LNG exports. The overall macroeconomic impacts of increasing U.S. LNG exports to 20 Bcf/d from 12 Bcf/d are small, reflecting the small size of the natural gas sector and supporting industries relative to the over $13 trillion U.S. economy.”
The full report is available here.
-30-
For more information or to schedule an interview with Medlock, contact David Ruth, director of national media relations at Rice, at or 713-348-6327.
Related materials:
The full report is available at http://energy.gov/sites/prod/files/2015/12/f27/20151113_macro_impact_of_....
Medlock’s biography is available at http://bakerinstitute.org/experts/kenneth-b-medlock-iii/.
Follow the Baker Institute on Twitter .
Follow Rice News and Media Relations via Twitter .
Founded in 1993, Rice University’s Baker Institute ranks among the top 10 university-affiliated think tanks in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at www.bakerinstitute.org or on the institute’s blog, http://blogs.chron.com/bakerblog.
Tags: Baker Institute, Center for Energy Studies
About David Ruth
David Ruth is director of national media relations in Rice University's Office of Public Affairs.
29 Dec 2015
