As the race towards net-zero…
Oil prices rebounded on Monday…
The boom in shale gas production over the last decade has eaten away at natural gas imports. New data released by the Energy Information Administration shows that the value of U.S. imports of natural gas hit their lowest levels in over 20 years. The U.S. imports natural gas largely through pipelines from Canada, but with such an abundance of domestic gas production, imports have dropped precipitously since 2005.
Yesterday, EIA released data showing that tight oil production has led to a significant drop in oil imports. Today’s data shows a similar picture for natural gas. But there are a few interesting differences between the two fuels. As EIA notes, the shale gas bonanza started well ahead of the boom in tight oil production. With both the volume and price declining for natural gas, the overall value of U.S. trade in natural gas dropped dramatically, reaching its lowest level in 2012 since 1995.
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Unlike crude oil however, natural gas imports have declined at the same time as a significant rise in consumption. As natural gas production soared, prices declined, allowing for a shift in consumption patterns. With oil, production climbed, but aside from the financial crisis, prices have not dropped from their levels a decade ago.
The reason for that is that oil trades on a global market, whereas natural gas trades regionally. Higher natural gas production in one country cannot easily be traded to another country. So, the greater abundance of U.S. gas led to sharply lower prices. Opening up the U.S. market to exports of LNG could change that equation – allowing product to reach global markets would contribute to more liquid supply but also increase the linkages between domestic prices with global supply and demand. For the time being, EIA’s data shows that greater domestic production of natural gas is improving the U.S.’s energy trade balance.
By Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com