Houston or Chicago (Reuters) – As natural gas prices have gone up, many U.S. industries have had to pay more for production and transportation. This trend should continue as the U.S. sells more gas to Europe to make up for the gas that Russia can’t send because of sanctions.
This year, U.S. natural gas futures have gone up by more than 400%, which is a lot more than the increases in retail gasoline and diesel prices that have made Americans angry and upset with the U.S. energy industry and government.
Many industrial firm leaders argue that the United States, a former major importer of natural gas, should cease exporting gas and instead prioritize its domestic needs. However, gas companies are pressing for more export capacity and drilling permission.
This year, gas production in important regions of the United States has slowed, in part owing to inadequate pipeline capacity. Additionally, bad weather reduced supply and increased demand.
The invasion of Ukraine by Russia and the consequent imposition of sanctions has sparked a race for U.S. supplies of gas that has been cooled to liquid form. LNG plants in the United States used 15% of domestic output in mid-March.
Huntsman (NYSE: HUN) Corp, which makes polyurethanes used to create electronics, construction materials, and furniture, is experiencing rising expenses, according to CEO Peter Huntsman in an interview with Reuters.
“Consumers will experience price shocks,” he added. He added that last year, the company’s raw material costs increased by more than $1.5 billion, with the majority of the rise attributable to energy prices.
Westlake Chemical (NYSE:WLK), which makes plastics and building siding, says that its annual costs go up by about $100 million for every $1 per million British thermal units (mmBtu) increase in natural gas.
“Inflation stemming from energy is the icing on the cake,” says Chip McElroy, CEO of McElroy Manufacturing, which manufactures massive machines that fuse thermoplastic pipes.
Futures prices for natural gas in the United States increased to $7.854 per mmBtu on Friday, up from $3.730 per mmBtu at the beginning of 2022, but are still much below the European and Asian benchmarks of $31 and $24 per mmBtu, respectively.
Analysts anticipate that prices will remain high due to rising demand from Europe, which is seeking to wean itself from Russian supplies.
In a letter to U.S. Energy Secretary Jennifer Granholm last month, Paul Cicio, president of the Industrial Energy Consumers of America (IECA), a trade group whose members include smelters, plastics, and paper-goods manufacturers, said in a letter to U.S. Energy Secretary Jennifer Granholm, “The manufacturing sector cannot invest or create jobs without assurances that our natural gas and electricity prices will not be imperiled by excessive LNG exports.”
The group wants Washington to stop giving out licenses to export LNG until the U.S. fills up its gas reserves.
LARGE HEATING BILLS
Some companies are worried that next winter’s heating costs might go up because prices haven’t gone down as they usually do in the spring when heating demand goes down.
John Schmeiser, CEO of the Western Equipment Dealers Association, a trade association. When you compare shops that are 30,000 to 40,000 square feet, the cost of natural gas is high.
Some businesses have survived the expense. According to a company representative, Nucor (NYSE: NUE), the largest steel company in the United States, has sold some of the gas it produces for its own use to cover some of the natural gas costs at its steel mills.
Executives in the LNG business said that high pricing should drive further production. They want the approval of additional projects by the Biden government.
“There is a need for both more pipeline and export facility construction,” said Dan Brouillette, president of Sempra Infrastructure, a company that constructs LNG facilities.
However, the majority of these projects would not become operational until at least late 2020 or 2024.
Currently, U.S. gas futures would need to hit $20 per mmBtu to reduce demand for U.S. LNG, according to Sankey Research analyst Paul Sankey.
“There is no upper limit for U.S. natural gas until the arbitrage for LNG exports is eliminated,” he added.
