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EIA: New US gas saved $4 billion in first 7 months

Bob Tippee
Editor

Anyone concerned about imported energy should find useful the simple proposition that raising production lowers imports unless consumption rises by the same amount.

It would seem, in fact, that politicians overtaken by hope for energy independence, which means no imported energy at all, should lead crusades for domestic oil and gas production.

Yet most of them use energy independence mainly as a marketing slogan for conservation mandates and subsidization of nonfossil energy.

Energy independence is, in any case, unachievable. It's useful as a concept only as a test for the presence of an adult sense of proportion.

To acknowledge the futility of energy independence, however, is not to deny the value of domestically produced energy.

In an Oct. 22 report, the US Energy Information Administration highlights the value of lowering high-cost imports by raising lower-cost domestic production.

The energy in this case is natural gas, US production of which has undergone what EIA calls "an historic shift."

After 9 years of little change, US gas output rose by 4% in 2007. In the first 7 months of this year, it leapt by 9% year over year.

"The increased production in the United States meant that the country has needed to import less natural gas in 2008 than in 2007, especially in the form of LNG," EIA notes (see the proposition above). "For the first 7 months of 2008, LNG imports fell by 64% compared with the same period in 2007, continuing a trend of reduced imports that started in the second half of 2007."

EIA then estimates the value of producing instead of importing gas.

In the first 7 months of 2008, it says, US wellhead gas prices rose to an average of $9/Mcf. In the same period, LNG sold in Japan for $13.30/Mcf.

At those prices, buying LNG would have cost about $4 billion more than the new US production during January through July, EIA reckons. The savings probably were higher in August and September, when US wellhead gas prices fell and Asian LNG prices rose.

Domestic production is good business, something besides energy that the US now desperately needs.

(Online Oct. 31, 2008; author's e-mail: bobt@ogjonline.com)


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