The US May Be Getting Smaller, But Our Natural Gas Exports Are Getting Bigger
“We could go to zero tomorrow and the problem isn’t solved,” John Kerry, President Biden’s Climate Czar, January 2021
One of the biggest liabilities with U.S. thinking on climate and energy is that Americans don’t travel much – not just abroad but even to other states (and that’s the case even disregarding the non-travel Covid year of 2020). Over 40% of Americans, for instance, have never left the country, and nearly 60% don’t have a passport. Making matters worse, 25% of American adults think the sun orbits the Earth.
Our ignorance is devastating. Climate change by definition is a global issue, so an inability to see beyond ourselves blinds us to what’s really happening around the world. There’s a worsening global calamity of poverty and energy deprivation that the vast majority of Americans never have to confront. The United Nations reports that nearly 17,300 children die every day from preventable causes, enabled by a shortage of the very same energy resources that Americans take for granted.
We don’t seem to realize that much of the world has just started to consume energy in a serious way: a growing 85% of the global population lives in still-developing countries (i.e., non-OECD). Poverty reduction, not reductions in CO2 and other greenhouse gas emissions, is understandably these governments’ greatest priority – and is sanctioned as such by the United Nations.
These countries won’t tolerate Western nations’ hypocrisy when it comes to energy consumption: in the U.S., for example, oil, gas, and coal supply 80% of our energy. The Department of Agriculture’s Economic Research Service reports that American GDP per capita in 2019 was $60,500, or almost 11 times the $5,650 for the still-developing world.
If poor countries are to deploy the renewable energy that many Westerners demand of them, the cost of such energy must come down significantly – while also improving its performance (wind and solar power, for example, are unavailable most of the time).
The U.S. and Europe now account for just 25% of the world’s CO2 emissions (see Figure). The vast majority of ensuing CO2 emissions will come from still-developing countries – with a total population of 6.7 billion – which are eager to consume energy the way Westerners do.
Ultimately, then, the global battle against climate change will hinge on what developing-world nations do and on how the West can help them lower their emissions while lifting the living standards of their populations.
In the wake of Covid-19’s devastation, and surging spending and debt, these tasks are becoming even more daunting.
This dire situation “out there” explains why new U.S. Energy Secretary Jennifer Granholm supports exports of liquefied natural gas (LNG).
We already know that President Obama did too: “President Obama’s Support For America’s Shale Oil And Natural Gas.”
Despite the demand destruction from Covid-19 that sunk prices to historic lows, U.S. LNG exports have rebounded to record levels (see Figure).
Our seventh facility is expected to be coming online this November (a year ahead of schedule), and we could become the largest LNG seller within a few years.
For context, America’s expanding LNG complex is now using ~11.5 Bcf/d of gas, compared to our total gas production of ~93.0 Bcf/d.
The Department of Energy projects that American prices will remain low because domestic production will outpace new demand by around a 2-1 margin annually in the decades ahead – freeing up more of our growing supply for export.
Environmentalists should be celebrating this U.S. natural gas boom.
The International Energy Agency has cited low-cost and abundant U.S. gas as an essential way to lower global CO2 emissions.
In the generation of electricity, gas emits 50% less CO2 than coal, and gas as backup fuel balances intermittent wind and solar to give these energy sources a commercial chance.
Practically speaking, policies opposing natural gas and U.S. LNG are really just pro-coal positions – especially in fast-growing but overwhelmingly coal-based Asia.
Despite media reports to the contrary, coal still generates 65% of the electricity in China and 70% in India – posing a major climate problem as these nations switch to electric cars.
The Asian giants, however, seek cleaner gas to clear their cities’ hazy skies, with 75% of all new LNG demand projected to come from Asia.
Gas accounts for just 6-8% of their energy demand portfolios, versus about 30% for the richest economies.
U.S. LNG exports to Asia were up 67% last year, despite demand destruction from Covid-19.
With more gas at the heart of net-zero plans for carbon – a wise investment as advancing technologies make efficient gas-power plants even more attractive to build – the global LNG market is projected to double to 100 Bcf/d by 2040.
This steady growth in supply is evolving LNG into a global commodity, like oil.
It’s no wonder, then, that heavily resourced Russia has aggressive plans to extend its LNG market share fivefold, to ~25% by 2035.
The necessity of U.S. LNG is therefore three-pronged: 1) limit Russia’s rising geopolitical influence in Europe, Asia, Latin America, and elsewhere; 2) give the developing world access to an affordable, reliable, and cleaner energy source; and 3) create economic opportunities here at home, namely tens of thousands of high-paying jobs and tens of billions of dollars in taxes and other fees.