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times greater than the price increase at Henry Hub in the United States.
Rice-Oxford states that
this is the result of the international market conditions that are simulated in the LNG20 cases.
Additionally, the LNG demand stimulus is primarily the result of highly constrained supply
potentials plus higher demand in Asia. Although shale potential is also constrained in Europe in
the LNG20 cases, the change relative to the Reference international case is small compared to
the change in Asia.
Marginally positive overall macroeconomic impacts. This result is robust to
alternative assumptions for the U.S. natural gas market. With external demand
for domestically
produced LNG exports at 20 Bcf/d of natural gas, the impact of increasing exports in excess of
12 Bcf/d is 0.03 percent of GDP from 2026-2040, or $7 billion annually in constant 2015 dollars.
In the high resource recovery case where U.S. LNG exports reach 28 Bcf/d, the impact of
increasing exports in excess of 12 Bcf/d is 0.07 percent of GDP from 2026-2040, or $20 billion
annually in constant 2015 dollars. The 2015 Study detailed several key drivers of the
macroeconomic impacts:
•
U.S. LNG Production and Investment: When U.S. LNG exports rise to 20 Bcf/d
from 12 Bcf/d, natural gas production is 4.0 percent higher in the domestic
Reference case. This is associated with a rise in net fuel exports of just 0.02
percent of GDP over the period 2026-2040 and additional investment of 0.06
percent of GDP. There are positive multipliers from the extra production and
investment, as activity is stimulated in the rest
of the economy, and as a result
total output is 0.1 percent higher from 2026-2040. Across the four cases with
endogenously determined exports, impacts on GDP are between 0.05 and 0.07
percent on average over the 2026-2040 period, with the biggest impact in the high
resource recovery case where production responds the most.
•
U.S. Natural Gas Prices: The Henry Hub
price is, on average, 4.3 percent higher
in the 20 Bcf/d export case than the 12 Bcf/d case over the period 2026–2040. As
noted above, higher natural gas prices dampen domestic consumption and erode
U.S. export competitiveness. In total, higher prices reduce GDP by 0.1 percent
from 2026-2040. For the case where exports reach 28 Bcf/d, the Henry Hub price
is 7.5 percent higher than the 12 Bcf/d case over the period 2026–2040.
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•
U.S. Profits: Profits in the 20 Bcf/d export case are higher given
the rise in
prices, production and export volumes, but the scale of the impact is small relative
to the size of GDP. Profits are 0.03 percent of GDP higher in the 20 Bcf/d case
compared with the 12 Bcf/d case. The rise in profit is also modest because it is
assumed U.S. producers receive the Henry Hub price on LNG exports rather than
the price in the destination market. It assumed that 95 percent of profits are
distributed to households and this results in a marginal increase in
consumption
and GDP from 2026-2040. In cases where exports exceed 20 Bcf/d, higher
natural gas prices help drive producers’ and exporters’ profits marginally higher,
though the larger increase in natural gas prices generates a larger impact on
consumer prices in the long run, offsetting some of the positive demand impacts.
•
Rest of World Natural Gas Production and Investment: Production in the rest of
the world is little changed when U.S. LNG exports increase to 20 Bcf/d from 12
Bcf/d. Due to the Study’s scenario
assumptions, international demand conditions
remain unchanged, and the addition of incremental U.S. LNG exports displaces
very little supply from the rest of the world. As a result, capital expenditures by
the natural gas sector in the rest of the world remain broadly unchanged when the
United States increases LNG exports. This result is similar in cases where exports
exceed 20 Bcf/d.
•
Rest of World Natural Gas Prices: The increase in the
availability of cheaper
U.S. natural gas exports on the world market dampens natural gas price increases
in Asia, though prices in Europe are little affected. The marginal decline in
natural gas prices both boosts real income in the rest of the world—which boosts
demand and is positive for U.S. exports—and boosts the competitiveness of Asian
firms relative to U.S. companies, which is negative for U.S. exports. However,
the small impact on gas prices and the relative unimportance of natural gas to total
energy supply in Asia means that the impact on consumption
in Asia is limited as
is the competitiveness boost enjoyed by Asian firms from lower natural gas
prices. As a result, the overall impact on U.S. GDP is limited. In cases where
exports exceed 20 Bcf/d, there is a greater convergence of domestic natural gas
prices with world prices as the Henry Hub price increase is greater than in the
case where LNG exports could not exceed 20 Bcf/d.
The price impacts are small
and have little noticeable impact on inflation rates over the forecast period.
Small declines in output at the margin for some energy-intensive, trade-exposed
industries. The sectors that appear most exposed are cement, concrete, and glass, but the
estimated impact on sector output is very small compared to expected sector growth to 2040.
Negative impacts in energy-intensive sectors are offset by positive impacts
elsewhere. Other industries benefit from increasing U.S. LNG exports, especially those that