EIA’s report came days before the Chicago Weather Service warned that a period of extreme bitterly cold weather would affect the region.
Cold winters have historically been associated with huge spikes in natural gas demand and prices. A potential bitterly cold Polar Vortex-driven winter across the Midwest generated a September article in Barron’s speculating that a lack of supply could quadruple the price for dry natural gas from $2.72 per thousand cu. ft. (mcf). With gas pipelines disclosing that a severe demand spike could force emergency rationing under “Operational Flow Orders,” the price of dry gas rocketed $4.84 mcf in December.
Despite a Polar Vortex freeze reaching down into the Midwest in January, gas prices have plunged 8 percent since January to a four-month low of $2.81 per mcf.
After 15 years of U.S. domestic production stagnating at about 53 billion cubic feet per day (bcf/d) and a price of over $18 per mcf, EIA issued a warning in 2005 that domestic dry natural gas production had peaked and was in permanent decline.
EIA forecast that U.S. demand growth could be met only with increased renewables and a 1,000-percent increase in liquid natural gas (LNG) imports to 12 bcf/d in 2015 and 18 bcf/d by 2025.
A review of EIA Annual Reports reveals that domestic natural gas production doubled since 2005, dramatically outpacing EIA annual forecasts for each of the last 14 years. The biggest growth has come from East Coast production in the Appalachia Region that almost tripled from 13 bcf/d in 2013 to 31 bcf/d, and production in the Texas Permian Basin that more than doubled to 13 bcf/d since 2016.
Instead of being an importer, the U.S has been exporting a net 6 bcf/d of domestically produced dry natural gas to Canada and Mexico for the last decade. With the U.S. having built 13 U.S. and one Puerto Rico LNG import terminals, three have been retooled for gas liquefaction and American LNG exports reached 2 bcf/d in 2018.
The Federal Energy Regulatory Commission approved ten new export terminals and issued multi-billion-dollar construction permits at five locations, as the Trump administration races to catch up with the spectacular natural gas production boom.
The long-term LNG comparative economic advantage for U.S. exports is overwhelmingly positive. The U.S. export cost is $5.15 per mcf, including $3 for dry natural gas, $1.10 to condense gas 450 times into a liquid, $0.70 for shipping, and $0.35 for regassification.
According to the U.S. Federal Energy Regulatory Commission’s November 2018 “World Estimated LNG Landed Prices,” selling price per mcf in Europe is $10.05, $10.03 in India, $10.13 in China, and $10.16 in Korea. That means that U.S. exporters of domestically produced dry natural gas are making about a 100-percent profit across the globe.
EIA reported that the U.S. energy boom over the last decade drove down America’s energy trade deficit from ten times greater than the value of exports in 2007 to break-even in 2018 and expects increasing surpluses through 2050.
But EIA still forecasts that U.S. electrical production from wind and solar “renewables” will almost double from 18 percent of domestic supply to 31 percent over the three decades. Those estimates assume that consumers will continue paying big and politically challenging utility surcharges to support California-style “renewable portfolio standard” subsidies.
EIA has consistently underestimated growth of domestic oil and natural gas production and overestimated future market prices. With a new technological wave increasing hydraulic fracking efficiency and rapidly expanding distances for horizontal drilling, American oil and gas exports are positioned to continue outperforming EIA forecasts.
Excerpt Chriss Street, American Thinker
