The United States should allow the market to dictate exports of liquefied natural gas exports and avoid legislation that promotes or limits shipments, according to a newly released study by The Brookings Institution.
The study says LNG exports are likely to have a modest impact on domestic natural gas prices and a limited impact on the competitiveness of U.S. industry and job creation.
The chemical industry and utilities, major consumers of natural gas, have questioned the wisdom of LNG exports.
Members of the chemical industry, a major part of Louisiana’s economy, worry that the low prices and competitive advantage created by shale gas will disappear if unlimited LNG exports are allowed. Consumers would also suffer if utilities are forced to pass along higher fuel prices to customers.
However, the Brookings study says those fears are unfounded.
The cost of producing, processing, and shipping the gas, and the global market for LNG will limit the amount of gas that can be profitably exported, the study says. Each new export terminal will increase the price of natural gas a little, which makes it more difficult for the new terminals to make money.
The terminals cost billions of dollars and it takes years to get state and federal approval for the facilities and to build them.
“Efforts to intervene in the market by policy makers are likely to result in subsidies to consumers at the expense of producers, and to lead to unintended consequences,” the study says. “They are also likely to weaken the position of the United States as a supporter of a global trading system characterized by the free flow of goods and capital.”