The gas boom brought about primarily by hydraulic fracturing has lowered the domestic price of natural gas so that the United States now has among the lowest prices in the world, and it has shifted the U.S. from a significant importer to a potential exporter of liquefied natural gas. This benefits consumers and led to gains in competitiveness for U.S. manufacturers, something desperately needed for the moribund U.S. economy.

But there is a conflict in the Obama administration. He signed an agreement to allow exports while simultaneously instructing the U.S. Environmental Protection Agency to restrict fossil fuels so that his subsidies for solar power companies don't fare even worse than they have.

What do the numbers say? A report presented to the U.S. Department of Energy from the Center for Energy Studies at Rice University's Baker Institute for Public Policy and Oxford Economics says that increasing export of liquefied natural gas above 12 billion cubic feet per day (Bcf/d) would allow the U.S. to gain a competitive advantage. 

But what will that do to lower prices? The same environmental groups that have lobbied for fossil fuels to be banned and their replacements subsidized have now lobbied against gas exports because they claim it will leads to higher prices for Americans.

"Low natural gas prices in the United States negatively impact the profitability of domestic upstream activities, which has, in fact, been a primary driver of interest in exporting LNG as suppliers seek new demands in higher-priced markets. While selling natural gas at higher prices on the world market would increase profits for U.S. gas producers, the price gap between the United States and the rest of the world will shrink, thereby eroding some of the benefits that have accrued to U.S. consumers and manufacturers. So the net balance of the gains and losses associated with trade are at the core of the analysis. In sum, the balance is positive for the U.S. economy," notes 
Kenneth Medlock, senior director for the Center for Energy Studies.

The report used the Rice World Gas Trade Model to simulate alternative futures to assess natural gas production, demand and, more generally, the international gas market based on a range of projections of U.S. resource endowments. Oxford Economics addressed the macroeconomic impact of the center's market analysis.  

Key findings from the report include:

LNG exports are associated with a net increase in domestic natural gas production.

Medlock said the study found that "the majority of the increase in LNG exports is accommodated by expanded domestic production rather than reductions in domestic demand, a result that reflects the very elastic long-run supply curve in North America."

As exports increase, the spread between U.S. domestic prices and international benchmarks narrows. In every case, greater LNG exports raised domestic prices somewhat and lowered prices internationally. The majority of the price movement (in absolute terms), however, occurs in Asia.

The overall macroeconomic impacts of higher LNG exports are marginally positive, a result that is robust under alternative assumptions. With external demand for U.S. LNG exports at 20 Bcf/d, the impact of increasing exports from 12 Bcf/d is between $7 billion to $20 billion annually from 2026 to 2040 in today's prices.

Medlock said that the impact from added LNG exports will not be felt until after 2025 due to the large amount of LNG supply that is coming online globally in the next few years. The global market simply cannot accommodate U.S. volumes in excess of 12 Bcf/d before 2025 in any of the scenarios considered. Accordingly, while international demand continues to increase, the market must first work through a large amount of available LNG supply before turning to U.S.-sourced LNG.

The reference case forecasts U.S. LNG exports of around 6.5 Bcf/d as there are abundant, competitive resources around the world that can be delivered to international markets via LNG or pipelines. Higher U.S. LNG exports require a variety of factors that limit the otherwise competitive production of natural gas outside of the U.S. Moreover, those factors must become increasingly restrictive to raise U.S. LNG exports over 12 Bcf/d.