LNG Exports Are One of the Primary Causes for the Rising Costs
For any business owner, gauging your overhead costs is vital to the success of your company. From labor to infrastructure, recognizing and reducing costs will determine your profit margin. Unfortunately, it can be difficult to plan for the volatility associated with the price of natural gas supply. Nevertheless, any successful business needs to look at projected gas prices when planning ahead.
The EIA (Energy Information Administration) is tasked with creating gas price projections for the use of policymakers. While past projections had natural gas at $4/Dth every year through 2020, prices are expected to remain over $7 for 2022 and $5 in 2023 as of this writing.
What is causing these price increases? One primary reason is that the growing LNG exports due to the current events in Europe are creating a deficit between natural gas demand and supply.
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Explaining the Repercussions of LNG Exports
In the first half of 2022, the United States began exporting more LNG (liquified natural gas) than ever to replace Russian exports throughout Europe. The United States has exported record volumes, and the Biden administration promised to supply even more LNG to its allies for the remainder of the year (and likely into 2023).
The result is that natural gas prices have increased by 50% in 2022 as domestic inventory falls. Prices that remained constant at $2-$3.50 are now steadily rising to $6. These rising prices are part of why inflation is growing in the United States as costs for manufacturing increase in tow. As for businesses, these costs are passed on to electricity and heat bills (especially in areas like the northeastern U.S. that deal with extreme winter and summer temperatures).
How Our Energy Consulting Services Can Help
More LNG export terminals are expected to come online through 2025 which will help to boost domestic exports. This will put upward pressure on gas prices over the next few years. So what can your business do to protect your bottom line from these unexpected costs over the next 2-3 years? Our energy procurement and efficiency services take a proactive approach to this energy challenge.
First, our procurement services help you manage the volatile energy market. We provide leading-edge market analytics, connect you with the top credit providers and draft energy contracts that reduce risk and avoid legal traps. So you’ll know you’re getting the most for your money when hedging your energy costs.
Second, we help you reduce your overall energy spend through our energy efficiency services. We reduce your carbon footprint through LED lighting retrofits, thermal insulation and boiler upgrades. We also help you embrace renewable energy like solar-plus-battery on-site power generation. Natural gas price fluctuations shouldn’t be crippling your business. With the right strategy, you can be prepared to meet any energy challenges. Find out how Environ can help! To consult with one of our experts, give us a call or fill out our contact form.