Natural Gas Export Growth a Major Factor Supporting Higher Prices During Trump Administration?
Energy News: December 2, 2024 Natural Gas Export Growth a Major Factor Supporting Higher Prices During Trump Administration? Natural Gasis
Energy News: December 2, 2024 Natural Gas Export Growth a Major Factor Supporting Higher Prices During Trump Administration? Natural Gasis
Energy News: December 2, 2024
In our November 11th Energy Update we asked “Does Donald Trump’s election guarantee lower Natural Gas and Electricity Prices long-term”.
We explained that although his administration will increase energy supplies by supporting the fossil fuel industry, demand is expected to outpace supplies therefore, we still believe we are in the early stages of a Cyclical Bull Market and prices will trend higher for at least 2 to 4 years.
Our belief is supported by the empirical observation that since 2000, when Natural Gas declined to where it was in 2024, it always preceded Cyclical Bull markets that trended higher 2 to 4 years.
It didn’t matter who was president at the time!
And we then pointed out another factor that would deplete energy supplies and support higher Natural Gas and Electricity prices in the long term.
A New York Times article released earlier this year stated something unusual is happening in America. The Demand for Electricity, which has stayed largely flat for two decades, has begun to surge.
“Over the past year, electric utilities have nearly doubled their forecasts of how much additional power they’ll need by 2028 as they confront an unexpected explosion in the number of data centers, an abrupt resurgence in manufacturing driven by new federal laws, and millions of electric vehicles being plugged in. Many power companies are already struggling to keep the lights on, especially during extreme weather, and they say the strain on grids will only increase.”
Although the new administration will likely curtail the swift transition to electric vehicles, the overall growth in power needed by electric utilities is expected to continue increasing, and increased exports is a major factor supporting higher prices in the long term.
In the April 9th Short Term Energy Outlook (STEO) the Energy Information Administration (EIA) forecasted America’s liquefied Natural Gas (LNG) exports will continue their growth since 2016 with three LNG export projects beginning operations and ramping up to full production by the end of 2025.
The EIA also forecasted another factor supporting the growth of America’s Natural Gas exports, our continued pipeline growth, mainly to Mexico:
Although EIA’s export projections are not set in stone, export demand is expected to continue increasing. last week Europe’s benchmark Natural Gas price reached a one-year high, and is approximately 400% above America’s benchmark Henry Hub price.
America’s LNG exporters will be highly motivated to increase exports to Europe to take advantage of the profit potential created by the widening spread:
Although the Trump administration’s policies promoting increased production will mitigate the impact of surging electricity demand domestically and exports internationally, demand is expected to outpace supplies, which supports the observation when prices were as low as they were in 2024, it always preceded Cyclical Bull markets that trended higher 2 to 4 years, and it didn’t matter who was president at the time!
We understand why you may hesitate to reserve Natural Gas and Electricity believing President Trump’s energy policies will result in lower prices. But based on the empirical observations in today’s report, we recommend anyone with agreements expiring within the next 18 months take advantage of today’s low Natural Gas rates, which based on the historical record will likely be lower than where rates are expected to average over the next 2 to 4 years.
Not every client’s risk tolerance and hedging strategy are the same, the goal of our reports is to reveal your risk/reward opportunities. We invite you to call one of our energy analysts to help plan a hedging strategy appropriate for your situation.
Ray Franklin
Energy Professionals
Senior Commodity Analyst
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