I just completed a summary of one of our Market Outlook presentations on the oil and gas industry. It was a great presentation by John Spears, and it’s going to be hard to shrink all that information to the 700 or so words I have available for it in the fall issue of Valve Magazine. Since it is important for everyone in the valve industry to know what he had to say, I’m also posting a more in-depth piece Monday August 27 in a Web Feature on ValveMagazine.com.
But as an appetizer, I thought it would be good to share a piece written by John Egan for Industrial Info Resources. In a recent article, John discussed the question of whether exporting LNG from the U.S. would make the domestic price too high. He discussed a recent study that “ pooh-poohs the potential for LNG exports to meaningfully push up the price for gas paid domestically.”
The study, titled "U.S. LNG Exports: Truth and Consequence," by Rice University professor Ken Medlock, points out that there is a big difference between a policy decision to authorize a particular level of LNG exports, the actual amount of exports that will occur, and the price that will result. Medlock wrote “The bottom line is that certification of LNG exports will not likely produce a large domestic price impact."
It seems to make sense. After all, just because there are permits granted, it doesn’t mean the terminals will be built, nor does it mean that the maximum amount of gas will be exported, nor does it mean that the price will necessarily rise to levels untenable by current domestic users.
That should be of comfort to domestic power producers, like Kevin Geraghty of NV Energy (also a speaker at the Market Outlook) who have switched from coal to natural gas as the cost became competitive. And it’s also good for the domestic producers of natural gas and the companies that supply rigs, pumps, valves and piping to them.
As I mention repeatedly in this blog, I am no economist, but it seems to make sense to me that, whatever the commodity, it is healthy for producers and consumers alike to move away from pricing being connected to contracts and speculation and more toward pricing based on costs. So why not grant the licenses, and see what happens?
I think that’s called a “free market economy”, isn’t it?