University paper doubts little impact on U.S. prices from LNG exports
() - Amid the debate over potential LNG exports from the United States, a new paper from Rice University's Baker Institute for Public Policy predicts the long-term volume of exports from the U.S. will not likely be very large. The paper also argues that the impact on U.S. domestic natural gas prices will not be large if the government allows exports. Opponents argue that allowing exports will force prices up and hurt industrial activity and household budgets.
"The lens that has been offered policymakers to address the question of U.S. LNG exports is inappropriate because it assumes a level of exports without accounting for the international market reaction," said Kenneth Medlock, author of the report, U.S. LNG Exports: Truth and Consequence. "The question before policymakers is one of licensing a capability, not licensing a fixed volume. Therefore, this issue must be viewed in the context of international trade if informed policy decisions are to be made," Medlock said.
Previous studies on the impact of U.S. LNG exports on domestic prices have assumed a particular volume of LNG exports from the U.S. when assessing the domestic price impact, but did not allow for domestic and international market interactions. This is a serious flaw, said Medlock, because market interactions will influence price movements and trade volume. "As the story plays out, the international gas market will evolve into something dramatically different from what it is today," the report said.