High Gas Prices Leave U.S. Industry Constrained
- May 16, 2022
- Posted by: Quatro Strategies
- Category: Energy
Soaring gas prices have raised manufacturing and transportation costs for many U.S. industries and the situation will likely resume as the U.S. continues to export more gas to Europe in order to make up for Russian supplies lost to sanctions.
U.S. natural gas futures have doubled this year, increasing more than retail gasoline and diesel prices that have made the public angry at the energy industry and the government.
While many industry executives have been asking the government to stop exporting gas and prioritize its own needs, gas producers are pushing for more export capacity and additional drilling permits.
Russia’s invasion of Ukraine and the subsequent Western sanctions have pushed up demand for U.S. LNG. U.S. LNG plants consumed 15% of domestic production in mid-March.
Manufacturing companies will have to pass the costs to consumers as higher gas prices are driving up costs.
U.S. natural gas futures have surged to $7.854 per mmBtu on Friday from $3.730 at the start of 2022 but remain far lower than Europe’s benchmark of $31 and Asia’s of $24 per mmBtu.
The prices are expected to remain elevated with growing demand from Europe, which is trying to wean itself off Russian imports.
The Industrial Energy Consumers of America (IECA), a trade group whose members include smelters, plastics and paper-goods makers, wants the government to stop approving LNG export permits until low U.S. gas stockpiles are rebuilt.
Some businesses are concerned that heating bills could skyrocket next winter.
LNG industry executives said high prices should drive new production. They ask the Biden administration to approve new projects.
They ask for both additional pipeline development and export facility development. Still, most new projects will not come online until late next year or 2024.
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