Houston, May 16 (BNA) The skyrocketing price of natural gas has led to higher manufacturing and transportation costs in many American industries, and the situation should continue as the United States exports more gas to Europe.
US natural gas futures have doubled this year, far more than the increases in retail gasoline and diesel that have angered Americans from the US energy industry and government, Reuters reported.
Many industrial executives believe that the United States, which has been a major importer of natural gas, should stop exporting gas and prioritize its own needs. But gas producers are pushing for more export capacity along with more drilling permits.
Gas production has slowed in key regions of the United States this year, in part due to insufficient pipeline capacity. Bad weather also reduced production and increased demand.
Higher gas prices are driving up costs for specialty chemicals maker Huntsman, which produces polyurethane used to make electronics, building materials and furniture, Chief Executive Peter Huntsman told Reuters.
“Consumers will see (price) shocks,” he said. He said the company went through more than $1.5 billion in raw material cost increases in the past year, mostly due to energy.
Westlake Chemical, which makes plastic and building siding, calculates that for every $1 per million British thermal unit (mmBtu) increase in natural gas, its annual costs rise by about $100 million.
“Energy inflation is just a post-injury insult,” adds Chip McElroy, CEO of McElroy Manufacturing, which makes giant machines that integrate thermoplastic tubes.
US natural gas futures jumped to $7.854 per million British thermal units on Friday from $3,730 at the start of 2022 but are still well below the $31 European benchmark and the $24 per million British thermal unit benchmark.
Higher demand from Europe has analysts expecting prices to remain elevated.
“The manufacturing sector cannot invest and create jobs without guarantees that natural gas and electricity prices will not be affected by excessive LNG exports,” said Paul Sisio, president of Industrial Energy Consumers of America (IECA), a trade group whose membership includes smelters. , plastics and paper makers, last month in a letter to US Energy Secretary Jennifer Granholm. The group wants Washington to stop approving LNG export permits until low US gas stocks are rebuilt.
Some companies are concerned that heating bills could rise next winter, noting that this year has not had the usual tide in prices in the spring with lower heating demand.
John Schmeeser, chief executive of the Western Equipment Dealers Association, a trade group, said last winter’s heating bills were unsustainable. “When you look at store sizes ranging from 30,000 to 40,000 square feet, that’s a big natural gas bill.”
Some companies have escaped rising costs. A spokesperson for Nucor, the largest US steel maker, said it has partially offset the natural gas costs of its steel mills by selling some of the gas it produces for its own use.
LNG industry executives said higher prices should stimulate new production. They want the Biden administration to approve new projects.
“There is a need not only to develop additional pipelines but also to develop additional export facilities,” said Dan Brouillette, president of Sempra Infrastructure, which is developing LNG plants.
However, most new projects won’t come online until at least late next year or 2024.
Currently, US gas futures must reach $20 per million British thermal units to cool US LNG demand, said analyst Paul Sankey of Sankey Research.
“There is no upper limit for US natural gas until we break the LNG export arbitrage,” he said.
MI