The shale gas revolution has delivered Americans inexpensive energy. As the chart below shows, the Henry Hub spot price for U.S. natural gas is many multiples lower than what Europe and Japan pay for this vital energy.
U.S. natural gas producers have been so successful utilizing horizontal drilling and hydraulic fracturing techniques that they are beginning to drive the price close to cash cost, hurting cash flows and forcing producers to look for other markets.
One look at the chart above should make even the most novice business mind suggest, “Why not sell the gas to the Japanese or Europeans?” And this is just what the Canadians and Australians are doing, by building natural gas liquefying and transporting ports to ship their gas to energy poor nations throughout the world.
In the United States, fourteen companies have submitted applications for permission to build LNG terminals to export this growing abundance to countries that are either unwilling or unable to produce their own. However, according to the Wall Street Journal, the “Obama administration is telling Japan and other allied countries they will have to wait before moving forward on plans to buy American natural gas.” Meanwhile Canada, Australia, Egypt, Qatar, Russia, the U.A.E., Yemen, and other countries secure long-term contracts and build infrastructure to trade LNG to gas-hungry Asia and Europe. The U.S. government told U.S. producers that they won’t be given permission to participate yet because of “political sensitivities.”
This puts U.S. gas producers in an unenviable position; they have produced such abundance that they are driving the price down to levels that make production uneconomic. They’ve had to choke back and even turn off the taps on enormous volumes of gas. The gas drilling rig count is currently at the lowest level since October of 1999 as companies shift rigs from natural gas to more oil and liquid rich targets.
The natural gas industry, through innovations in hydraulic fracturing, has produced an abundance of energy, not to mention the jobs needed to keep this abundance flowing. This revolution came about because private individuals created wealth from what was useless rock. By barring trade with other nations, the Federal Government has usurped the right of free people to trade the fruits of their labors.