US Shale Natural Gas: Lowering Global Prices and CO2 Emissions
Since the shale revolution took flight in 2008, U.S. natural gas production has soared 60% to over 90 Bcf/d. That’s a whopping 25% more than what second place Russia yields. This U.S. shale surge has led to dramatically lower gas prices (we are currently experiencing the lowest summer prices in over 20 years) and a shift in U.S. manufacturing (from oil to gas) and electricity (from coal to gas). Beyond lower cost, this transformation has been environmentally beneficial as well: natural gas emits 30% less CO2 than oil and 50% less than coal.
Indeed, natural gas this year will supply nearly 40% of U.S. power, about double what it provided before the shale revolution. Gas is also the backup fuel to compensate for the natural intermittency of wind and solar power: gas is needed for when "the wind is blowing" and "the sun isn’t shining." The U.S. is now reducing its CO2 emissions faster than any country on Earth: "Thanks to Natural Gas, US CO2 Emissions Lowest Since 1985."
Looking forward, a rapidly expanding U.S. natural gas export business (via LNG) will offer more affordable, more flexible, more reliable, and cleaner natural gas to a too slowly developing world that requires all the modern energy that it can get. Today, some 85% of the world’s population lives in still developing nations, only dreaming of the access to energy and high living standards that we Americans have enjoyed for many decades.
The International Energy Agency (IEA), energy advisor to the 36 OECD member countries (i.e., the world’s richest economies), touts gas as playing a foundational role in reaching global climate goals. The developing cities want more natural gas to reduce their local pollutants and clear hazy skies that an immense urbanization process has been worsening.
Really starting in February 2016, U.S. LNG exports have surpassed Malaysia this year, and we are now the world’s third largest LNG supplier. At over 6 Bcf/d, we are supplying 12-14% of the world’s LNG, a stunning achievement in such a short amount of time. With a handful of more export terminals set to soon come online, and literally dozens more being considered, IEA expects us to surpass Qatar and Australia to become the largest LNG exporter by 2024.
And of course other nations want our gas: “Why U.S. Natural Gas Prices Will Remain Low.” Low prices are especially essential for the still developing nations and their citizens who simply cannot afford more expensive energy. The U.S. shale revolution and accompanying LNG exports have pulled prices down to where gas markets find equilibrium around the world. IEA notes how this has first been happening indirectly, “as gas originally developed for the U.S. market sought alternative consumers,” and “now directly via U.S. gas exports.”
In addition, critically, “the growth of destination-flexible, hub-priced LNG exports from the U.S. is providing a catalyst for a more liquid global gas market.” We are adding the flexibility, transparency, and predictability that the overly rigid global LNG market has long been lacking. For LNG pricing, we are helping to increase more gas-on-gas competition and spot market sales, while lowering the precarious reliance on oil-indexation and long-term contracts.
Further, the U.S. shale industry also continues to improve its own environmental performance, cutting emissions in production and transport. Since 1990, the industry has spent nearly $300 billion in these great achievements: “Improving the Natural Gas and Oil Industry’s Environmental Performance.” For natural gas, leaked methane is obviously lost product, so the incentive to stop it is very high.
Thus, our policymakers should be supporting more gas development here, the infrastructure required, and also even more exports abroad. LNG has long enjoyed bi-partisan support. This is especially true since our competitors are unfairly and relentlessly backed by their governments that leverage them as extensions of national policy. We must continue to help others get unfettered access to affordable, reliable, and cleaner gas.
Just think about our importance for a country and a world that is increasingly turning to natural gas. Amazingly, Appalachia (OH, WV, PA) and West Texas’ Permian basin have accounted for over 70% of the world’s new gas supply since 2012. In other words, without the U.S., a gas hungry world would need to turn to Vladimir Putin and his emerging Gas Exporting Countries Forum that have a grand strategy to dominate.
We must stop them from controlling the globalizing gas market like OPEC long did for oil, only until the U.S. shale oil boom since 2008 loosened its grip: "How the US shale revolution changed the face of geopolitics."
Jude Clemente is the Editor at RealClearEnergy.