As Europe struggles to reduce its dependence on Russian energy exports, gas may be the fuel of the moment.
Natural gas still trails oil and coal in the amount of energy generated worldwide, but it’s been gaining on both. As Europe struggles to break free from its dependence on Russian gas after the invasion of Ukraine, gas has become perhaps the most geopolitically important fuel of the moment.
This puts the world’s biggest natural gas producer, the US, in an interesting position. Gas production here has risen about 80% since 2006, as hydraulic fracturing (aka fracking) has enabled drillers in Pennsylvania, Texas, and elsewhere to extract vast quantities of gas and oil from shale deposits.
At first almost all the increased gas supply went to electricity generation, with gas supplanting coal in 2016 as the country’s top power source. But that year also saw the completion of the first of several facilities, most along the Gulf Coast, that liquefy natural gas and pump it into waiting ships for export. Now about 16% of production is going abroad, most by LNG tanker, and so far this year the US has been neck and neck with Qatar for the title of world’s top LNG exporter.
These exports could be a godsend for Europe, and they’re certainly good for the oil and gas industry. For US consumers, there’s a bit of a catch, though. Because it’s relatively hard to transport, natural gas has tended to be priced very differently in different parts of the world. Since the fracking boom began, US prices have been well below the global average. The rise of LNG exports introduces a new set of customers who are used to paying lots more, which means US gas users will pay more, too.
● King Oil
Oil consumption worldwide amounted to 184 exajoules (a quintillion joules, or about a quadrillion BTUs) in 2021, according to the BP Statistical Review of World Energy. Coal consumption was 160 exajoules, and natural gas 145. Nuclear, hydroelectric, and renewables added up to 105.
● Lone Star
Texas is the top natural gas producing state, at 10.5 trillion cubic feet in 2021, trailed by Pennsylvania at 7.7 trillion, Alaska at 3.5 trillion, and Louisiana at 3.4 trillion.
● On Reserve
The US only ranks fourth in proven natural gas reserves, at 446 trillion cubic feet, as estimated by BP. Russia is first at 1.3 quadrillion, followed by Iran and Qatar.
● Burning for Power
The electricity-generating sector accounted for 41% of US natural gas consumption in 2021, with industrial users at 30%, residential 17%, and commercial 12%, according to the US Energy Information Administration.
Fox is a columnist for Bloomberg Opinion.Author: Justin Fox